What to do with your Bitcoin and Lightning node
You listened to your favorite influencer or friend and finally set up a Bitcoin or Lightning node, now what?
Increase your privacy — Connect your wallet to your node
The first thing you should do is connect your wallets to your node. When you open your wallet or plug your hardware wallet in, you are taking the xpub of your wallet and sending it to an electrum server. Your xpub is a dataset of your past, current, and future addresses. It does this so it can read your balances. Put another way, every time you looked at your wallet to see if number go up, you leaked all of your addresses, even the addresses you haven’t created yet, to an unknown third party who is running an electrum server.
The question you should be asking yourself is, “who has all of my addresses” and the answer is, no one knows. Trezor claims not to keep that data, Ledger keeps your current addresses and the next future 100 addresses, if you use something like Sparrow then it gets pointed at trusted nodes of members of the community, but some of you have 100% leaked your xpubs to Chainalysis and other surveillance firms that run public electrum servers to collect all of your wallet data. That changes today.
Get a new wallet that supports full nodes
Most of you will need to change wallets for this. You’ll think it’s a pain but it’s probably for the best. Find a wallet that has full node support:
Sparrow — Only works with on chain addresses, BIP 32, BIP 39, and hardware wallets.
Specter — Only works with on chain addresses, BIP 32, BIP 39, and hardware wallets.
Phoenix — This is an on-chain and lightning wallet.
Desktop and Mobile
Electrum — Only works with on chain addresses, BIP 32, BIP 39, and hardware wallets.
Greenwallet — Only works with on chain addresses, BIP 32, BIP 39, and hardware wallets.
Bluewallet — Only works on chain. Their lightning wallet is custodial.
Once you check if you wallet has full node support or find a wallet that does, you’ll need to go into the settings and connect your wallet to your node.
For the sake of demonstrations, I’ll be using MyNode. I wrote a guide on how to set this up if you’re curious or need help getting started.
In MyNode, click on Electrum Server and then you’ll see a Server IP address in the upper right. Copy that and then add a : followed by the port number. It should look something like 123.456.7.89:50001 or 123.456.7.89:50002. If your using a wallet that has Tor support, you’ll need to copy the address that ends in .onion and then add :9050.
Conversely, you may want to assume all of those addresses are doxxed and start with a fresh wallet that is connected to your node from the start. Most wallets don’t publish what they do with the xpub data or what servers they are connected to. If you transfer the coins to a fresh wallet, don’t sweep the wallet. Take the time to do some UTXO management and use bech32 or Taproot addresses.
Increase your privacy — Lookup addresses on your node
If you have ever made a transaction, odds are you have seen some kind of link that lets you view the transaction in the mempool or on a block explorer. They provide these links so you can see if your transaction is still pending and when it gets confirmed. It’s a useful feature, but some block explorers track your IP address or collect the metadata about what kind of device you’re using when you look at a certain address. Sure it can be any address, but let’s be honest, it’s statistically yours.
Increase your privacy and save some fees- use a mempool
Most nodes come with both mempools as well. Rather than going to mempool.space or blockstream.info, click on the tools bundled with your node. Mempool.space for example has the same interface but rather than querying their node and exposing data to them, you are sending that data to your own node. Some disclose this information, some don’t pay attention to it, but you should assume every address is being monitored. I wrote a detailed post on how to use a mempool here.
You can save a lot of on fees if you always check your mempool before making a transaction. Most wallets, even if you switch it to a low fee setting, is still overpaying fees. Most wallets will default set it to 2 or 3 sats per vbyte but you can often get a transaction through at 1 sat per vbyte. This is especially true if you want to pay high fees and get it into the next block.
Bonus: Don’t broadcast a transaction from your node
If you do want to take your privacy seriously, don’t broadcast a transaction from your node. Every node has their own mempool which means everyone has different pending transactions in the queue. If you consistently broadcast transactions from your node, all of those addresses can be linked back to your node with your IP address which may or may not be on clearnet, a VPN, or Tor.
You can do this in a more private manner by:
- Create the transaction hex in your wallet
- Go to Blockstream on a VPN here or
- Dowload Tor then copy the Blockstream Tor v3 address below http://explorerzydxu5ecjrkwceayqybizmpjjznk5izmitf2modhcusuqlid.onion/tx/push
- Paste the transaction hex and broadcast it off of their node
Open some Lightning channels
Some of the plug and play nodes have a wallet built in that you can interact with the Lightning network as well. Send some sats to it, click on any of the available wallet interfaces and start opening some channels.
You’ll need to find some peers to connect to but keep a few things in mind. You can:
- Connect to a peer that you’ll use a lot like Fold, River, etc
- Connect to a big routing hub peer
- Connect to a local Bitcoiner, friend, or family member who runs a node
You can read more about Lightning from the Bree wallet team which is where those graphics came from here.
Earn interest on those channels
One of the things you can do if you are not actively using your lightning channels, is to lease them out on Lightning Pool. This is a service where you can earn interest by letting others trustly use your channel capacity. This is something that is very useful in a high fee environment.