B++ Logo
Feedback

Lightning Routing Fees

Lightning routing fees are how nodes earn income for forwarding payments. Understanding fee calculation is essential for both routing nodes and payment senders.

Fee Structure

Lightning fees consist of two components:

  1. Base Fee: Fixed fee per HTLC (in millisatoshis)
  2. Proportional Fee: Percentage of payment amount (in parts per million)

Fee Formula

Total Fee = Base Fee + (Payment Amount × Proportional Fee / 1,000,000)

Example

Given:

  • Base fee: 1000 msat
  • Proportional fee: 10 ppm (parts per million)
  • Payment amount: 100,000 sats (100,000,000 msat)

Calculation:

Base Fee = 1000 msat
Proportional Fee = 100,000,000 × 10 / 1,000,000 = 1000 msat
Total Fee = 1000 + 1000 = 2000 msat (2 sats)

Routing Policy

Each node advertises a routing policy that specifies:

  • fee_base_msat: Base fee in millisatoshis
  • fee_proportional_millionths: Proportional fee in parts per million
  • cltv_delta: Required expiry delta (in blocks)

Example Policy

{
  "fee_base_msat": 1000,
  "fee_proportional_millionths": 10,
  "cltv_delta": 40
}

This means:

  • 1000 msat base fee per HTLC
  • 10 ppm proportional fee
  • Requires 40 block expiry delta

Fee Calculation Along a Route

When calculating fees for a multi-hop route, fees accumulate:

Example Route

Alice → Bob → Carol → Dave
Payment: 100,000 sats

Bob's Policy:
  Base: 1000 msat
  Proportional: 10 ppm

Carol's Policy:
  Base: 2000 msat
  Proportional: 500 ppm

Dave (final hop, no fee)

Calculation

Step 1: Calculate fee to Carol (from Bob)

Base: 1000 msat
Proportional: 100,000,000 × 10 / 1,000,000 = 1000 msat
Total: 2000 msat
Amount to Carol: 100,000,000 + 2000 = 100,002,000 msat

Step 2: Calculate fee to Dave (from Carol)

Base: 2000 msat
Proportional: 100,002,000 × 500 / 1,000,000 = 50,001 msat
Total: 52,001 msat
Amount to Dave: 100,002,000 + 52,001 = 100,054,001 msat

Total Fee Paid: 54,001 msat (54 sats)

HTLC Amount Calculation

For each hop, the HTLC amount includes:

  • Original payment amount
  • All fees accumulated up to that point

Backward Calculation

Starting from the final amount, work backwards:

Final Amount (to Dave): 100,054,001 msat

Carol's HTLC to Dave: 100,054,001 msat
  (includes: 100,000,000 + 2000 + 52,001)

Bob's HTLC to Carol: 100,002,000 msat
  (includes: 100,000,000 + 2000)

Alice's HTLC to Bob: 100,000,000 msat
  (original payment)

Integer Division

Important: Lightning uses integer division for fee calculation (as per BOLT 7).

This means:

  • Round down (floor) any fractional results
  • No rounding up
  • Can lead to small discrepancies

Example

Payment: 1,000,000 msat
Proportional Fee: 3 ppm

Calculation: 1,000,000 × 3 / 1,000,000 = 3 msat ✓

But if payment was 999,999 msat:
999,999 × 3 / 1,000,000 = 2.999997 msat
Integer division: 2 msat (rounded down)

Fee Economics

For Routing Nodes

Revenue Sources:

  • Base fees from each forwarded payment
  • Proportional fees based on payment size

Costs:

  • Channel liquidity (locked capital)
  • Risk of failed payments
  • Operational costs (node maintenance)

Optimization:

  • Set competitive but profitable fees
  • Balance liquidity across channels
  • Monitor network conditions

For Payment Senders

Considerations:

  • Total fee across route
  • Payment success probability
  • Route length (more hops = more fees)

Optimization:

  • Find routes with lower fees
  • Use direct channels when possible
  • Consider payment splitting (MPP)

Fee Limits

Maximum Fees

There's no hard limit on fees, but:

  • Very high fees reduce payment success
  • Market forces keep fees reasonable
  • Nodes compete for routing business

Minimum Fees

Some nodes set minimum fees to:

  • Cover operational costs
  • Discourage spam
  • Ensure profitability

Fee Discovery

How Senders Find Fees

  1. Network Graph: Query network for channel policies
  2. Route Calculation: Calculate fees for potential routes
  3. Fee Comparison: Compare routes by total fee
  4. Route Selection: Choose route with acceptable fees

Fee Updates

Nodes can update their fees:

  • Change base fee
  • Change proportional fee
  • Update channel policies

Changes take effect immediately for new payments.

Best Practices

For Routing Nodes

  1. Competitive Pricing: Set fees that attract routing
  2. Monitor Market: Adjust fees based on network conditions
  3. Balance Channels: Maintain liquidity for routing
  4. Transparent Policies: Clearly advertise fee structure

For Payment Senders

  1. Compare Routes: Check fees across different routes
  2. Direct Channels: Use direct channels to avoid fees
  3. Payment Size: Larger payments pay more in proportional fees
  4. Route Optimization: Balance fees vs. success probability

Common Issues

Fees Too High

Problem: Route has very high fees

Solutions:

  • Try different routes
  • Use direct channels
  • Split payment (MPP)
  • Wait for better routing conditions

Fees Not Calculated Correctly

Problem: Fee calculation doesn't match expected

Solutions:

  • Check integer division
  • Verify policy values
  • Account for all hops
  • Include base and proportional fees

Summary

Lightning routing fees:

  • Two components: Base fee + proportional fee
  • Accumulate: Fees add up along the route
  • Integer division: Use floor division for calculations
  • Economic incentive: Rewards nodes for routing
  • Market driven: Competition keeps fees reasonable

Understanding fees helps both routing nodes optimize revenue and payment senders minimize costs.

  • HTLCs - Hash Time-Locked Contracts that carry payments along the route
  • Multi-Part Payments - Splitting payments across multiple routes
  • Channels - How channels and liquidity affect routing
  • Onion Routing - How routes are encoded for privacy