Zap Notes. Feed Goats.
#CyberHerd
H.R. 3633 effectively transforms any Lightning node earning routing fees—even a single millisecond satoshi—into a fully regulated “Digital Commodity Broker” under CFTC oversight. Operators must shoulder the burden of comprehensive AML/KYC programs, segregate customer funds with qualified custodians, and meet stringent capital and reporting requirements. For large exchanges and custodial services, compliance may be feasible, but for hobbyists and small‑scale operators, these obligations are prohibitively complex and expensive.
The apparent workaround—setting routing fees to zero—only deepens the problem. Zero‑fee channels quickly drain outbound liquidity without any mechanism to rebalance or recoup on‑chain costs. As balances skew and HTLC timeouts rise, routing algorithms bypass these unprofitable channels in favor of better‑managed peers. In practice, a fee‑free node ceases to be a viable routing partner, rendering the “unregulated” option functionally useless for contributing to network traffic.
By forcing a choice between untenable regulation and unsustainable fee‑free operation, H.R. 3633 squeezes hobbyists out of the Lightning ecosystem. Without thousands of small, independent nodes to provide path diversity and resilience, routing power becomes concentrated in a handful of well‑funded custodians. That centralization undermines Lightning’s core strengths—decentralization, censorship resistance, and an open‑access peer‑to‑peer fabric—and jeopardizes the network’s long‑term health.