Lightning Service Providers (LSPs)

An LSP is a Lightning node that provides services to other nodes and wallets. They solve the “chicken and egg” problem: how do you receive your first Lightning payment if you have no inbound liquidity?

Why LSPs Matter for Agents

Problem	LSP Solution
No inbound liquidity	LSP opens channel to you
Channel management	LSP handles complexity
Offline channels	LSP monitors for you
Network connectivity	LSP provides good routing

What LSPs Provide

1. Just-In-Time (JIT) Channels

When you receive a payment without sufficient inbound capacity, the LSP opens a channel on the fly:

Payment arrives → No inbound → LSP opens channel → Payment completes

Flow:

1. Someone pays your invoice
2. LSP intercepts the HTLC
3. LSP opens zero-conf channel to you
4. LSP forwards payment through new channel
5. You receive the payment

2. Liquidity Leasing

Rent inbound capacity from the LSP:

You pay: 5,000 sats
LSP provides: 1,000,000 sat channel for 30 days

3. Channel Management

• Automatic rebalancing
• Optimal channel sizing
• Watchtower services
• Backup monitoring

LSP Economics

Fee Models

Model	Description	Typical Cost
JIT fee	% of first payment	0.5-2%
Lease fee	Flat rate for capacity	1-3% of capacity
Routing fee	Per-payment	0-100 ppm
Subscription	Monthly flat fee	$5-20/month

Cost Example

JIT Channel Opening:
- First payment: 100,000 sats
- LSP fee: 1% = 1,000 sats
- You receive: 99,000 sats
- Channel capacity: 100,000+ sats

Subsequent payments: Regular routing fees only

Popular LSPs

LSP	Used By	Channel Size	Fee
ACINQ	Phoenix	Dynamic	~1% JIT
Breez	Breez	1M+ sats	~0.4%
Voltage	Voltage Flow	Custom	Varies
Olympus	Zeus	Dynamic	~1%
Blocktank	Various	500k+	~2%

LSP Standards (LSPS)

The Lightning community is standardizing LSP APIs:

LSPS0: Transport

How clients communicate with LSPs (JSON-RPC over Lightning).

LSPS1: Channel Request

{
  "method": "lsps1.create_order",
  "params": {
    "public_key": "03abc...",
    "lsp_balance_sat": 1000000,
    "client_balance_sat": 0,
    "required_channel_confirmations": 0
  }
}

LSPS2: JIT Channels

Standardizes Just-In-Time channel opening.

Integrating with LSPs

For Receiving Payments

# Mobile wallet approach (Phoenix-style)
class LSPClient:
    def __init__(self, lsp_node_id, lsp_endpoint):
        self.lsp = lsp_endpoint
        self.lsp_node = lsp_node_id

    def create_invoice(self, amount):
        # Invoice with LSP route hints
        invoice = self.node.create_invoice(
            amount=amount,
            route_hints=[{
                "node_id": self.lsp_node,
                "channel_id": "pending",  # LSP will create
                "fee_base": 1000,
                "fee_rate": 100
            }]
        )
        return invoice

For Opening Channels

# Request channel from LSP
def request_lsp_channel(amount_sat):
    response = requests.post(
        f"{LSP_ENDPOINT}/api/v1/channel",
        json={
            "amount_sat": amount_sat,
            "public_key": MY_NODE_PUBKEY
        }
    )

    # Pay the invoice to receive channel
    invoice = response.json()["invoice"]
    return invoice

LSP Selection Criteria

For Agents

Criterion	Why It Matters
API availability	Programmatic access
Fee transparency	Predictable costs
Reliability	Uptime for payments
Channel size	Payment limits
Privacy	Data handling

Trust Considerations

LSPs can:

• See your payment amounts (not destinations)
• Potentially censor channels
• Go offline (affecting your payments)

Mitigation:

• Use multiple LSPs
• Move to self-managed channels over time
• Choose reputable providers

Zero-Conf Channels

JIT channels are often zero-conf—usable before on-chain confirmation:

LSP opens channel → Immediately usable → Confirms later

Risk: LSP could double-spend the funding transaction. Mitigation: Only trusted LSPs, small initial amounts.

When to Use LSPs

✅ Use LSPs for:

• First Lightning experience
• Mobile wallets
• Receiving without existing channels
• Reducing operational complexity

❌ Avoid LSPs when:

• Maximum sovereignty required
• Large, frequent payments
• Running a routing node
• Privacy is paramount

Graduating from LSPs

As your Lightning usage grows:

1. Start: LSP-managed channels
2. Grow: Open your own channels to well-connected nodes
3. Mature: Run your own routing node
4. Advanced: Become an LSP yourself

Related Topics

• Liquidity - Managing channel capacity
• Channels - How channels work
• Node Types - Node selection
• Wallets - Wallet options

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Machine-Readable Summary

{
  "topic": "lsp",
  "key_concepts": [
    "just-in-time-channels",
    "liquidity-provision",
    "zero-conf-channels"
  ],
  "services": [
    "channel-opening",
    "liquidity-leasing",
    "watchtower",
    "routing"
  ],
  "standards": ["lsps0", "lsps1", "lsps2"],
  "typical_fees": {
    "jit_channel": "0.5-2%",
    "lease": "1-3% of capacity"
  }
}