You can still use Bitcoin Lightning in a decentralized way - Here's is a quick and easy 2-hour tutorial on how to use Lightning without centralized services

(Disclaimer: This is comedy. Do not take this seriously. Real friends and centralized service providers are not as sketchy as I make them out to be. It's ok to be partially centralized on Lightning, and it's ok to use Lightning Shell to connect with random strangers on the Internet.)

Lightning Centralization is FUD (kind of)

I've been seeing a lot of Lightning FUD over the past few years saying that it's completely centralized, and I'm here to correct this misconception.

First, "completely" means 100%. As long as there is one user using a self-custody wallet and running their own full node, all you FUD'ders are wrong.

While I admit most people are connecting to Lightning in a centralized way (e.g. Strike, Wallet of Satoshi, Breez SDK), there are still ways to self-custody and manage your own Lightning account by running your own Lightning node. You only need to learn some simple basic concepts like opening/closing channels, onion routing, managing channel liquidity, rebalancing, and monitoring your channel partners. It's so simple any person can learn this in under 2 hours ... if they have strong IT capabilities ... sometimes.

Step 1 - Opening a balanced channel

How do I open a balanced Lightning channel?

The secret to success is in channel management.

If you open up a lightning channel normally, it will be unbalanced and you will not have any inbound liquidity. Without inbound liquidity, no one can send to you. For every sat you spend outbound on your channel, you open up 1 sat of inbound liquidity. So for each BTC you want others to be able to send you, you will have to first send someone 1 BTC through your channel.

1. Find a friend you trust with your money
2. Open a 1+ BTC (outbound-liquidity) channel with them.
3. Make sure that friend also has at least 0.5 BTC of incoming liquidity with the rest of the Lightning network, meaning that they must've gone through these steps in the past
4. Loan them 0.5 BTC by sending it through your channel with them
5. Ask them to send you back the 0.5 BTC on Bitcoin L1 or off-chain in fiat
6. That's weird. They said that they are encountering technical issues. Ask them to try sending you that 0.5 BTC back again.
7. No response. Maybe they're having an Internet outage. Attempt to track them down.
8. Oh no! It turns out they were hurt in a boating accident. Ask them if they're ok from their boating accident.

I see some of you guys are still stuck on the step of finding a friend. Well, not a problem. If you don't have any friends to trust with your money, there are forums where you can trust random strangers on the Internet to open channels in a ring for mutual liquidity.

Here's a 30-minute tutorial on how to do this with strangers: https://www.youtube.com/watch?v=DNfsCvyBruM

And if you don't like strangers, here's a 60-minute tutorial on how to dual-fund: https://www.youtube.com/watch?v=i_GxmNZjwhk

Step 2 - Rebalancing your channel

I have been using Lightning for awhile and have used up my inbound channel liquidity. How do I rebalance liquidity on that channel?

It's easy, just close your channel and re-open a new one with your friend from step 1 and repeat the same process for the low cost of 2 on-chain transactions. Hopefully he has recovered from his boating accident by now.

Oh no, he hasn't yet? He's not around to collaborative-close a channel? Well then you could buy liquidity from a service provider. The more capacity you buy, the more expensive it gets. You could use Breez and Blocktank, but their services are centralized. The decentralized way is to use a P2P marketplace like Magma for the low cost of only $250 (18k fixed + 6.5k ppm) to buy each 1 BTC of inbound liquidity. No biggies.

Step 3 - Dealing with Routing Issues

I want to send Bitcoin on Lightning to another friend, but they don't have a Lightning address so I can't route to them.

Boohoo. This ain't Ethereum where creating a single account automatically gives you global routing to that account on every layer 2 network and EVM network. That would be too simple. Get your friend onboard Lightning and ask them to create a channel! It was easy for you to open a channel, so they can do it too.

Now that they have opened a channel after 3 hours of fiddling around, you can finally send to them on Lightning. Oh what? They didn't connect to a centralized node so there is no route to their address? Tell them to open another channel to the main Lightning network. Oh what x2? There is a route now, but because they aren't using centralized nodes, there isn't enough capacity to send them 0.5 BTC? Not a problem. You can still send back to their Bitcoin address once you learn how to execute a reverse submarine swap.

If that was too complex, who needs friends anyways? Ever since a boating accident, you are starting to suspect that trusting others isn't ideal for Bitcoin.

Step 4 - Dealing with bad channel partners

I have decided to end my relationship with a friend who has had multiple boating accidents. But before I could get rid of him, he had already force-closed my channel while I was offline on vacation (must've seen my trip photos on FB) and not paying attention.

Ha! This is a newbie mistake that's easy to avoid. First, just keep your node running every day, all day long. If you're offline, your channel partner can force-close your channel or broadcast an outdated commit. As long as you are monitoring the channel, they can't escape with your funds.

If you can't monitor your channel, you can pay for a 3rd-party watchtower to watch over your channel and report for you. Figuring out which watchtower to trust is as easy as spending a few hours to research them. Even if you're monitoring your channel, they can still grief you by screwing around with your channel, forcing you to force-close it, locking up your funds until the channel finishes closing. And if that bothers you, don't use Lightning non-custodially.