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Over the last 15 years, Bitcoin has visibly changed a lot from a social, political and monetary perspective. From a digital currency that amused a few geeks on the internet, it has become a financial asset that is attracting the attention of banks, corporations and governments worldwide.
However, few people know what goes on under the hood of Bitcoin or how Bitcoin technology works and develops. This is because Bitcoin development is quite slow and complex. Bitcoin’s development philosophy is based on ossification. This means that any changes to Bitcoin must be made without changing the rules of the past so that all nodes can remain compatible.
To preserve the decentralized aspect of Bitcoin, compatibility between a large number of nodes is required. This is in stark contrast to the development methods of other cryptocurrencies, which rely on faster and more drastic iterations of their protocol.
This particular type of development leads to carefully thought-out solutions that take years to develop.
The Lightning Network
Before we start with an explanation SpliceTherefore, it is important to understand the second layer payment protocol Lightning Network for Bitcoin. As the name suggests, it is a network built on top of the Bitcoin network.
This solution was proposed in a white paper by in January 2016 Joseph Poon et Squidward Dryja. This solution has evolved significantly since then, with dozens of companies and hundreds of developers contributing to its development. The main goal is to offer an alternative to transactions carried out on-chain. Lightning transactions occur off-chain and therefore are never recorded on the Bitcoin blockchain.
Consequently, Lightning transactions are almost free and possible immediately. All because they are not subject to Bitcoin’s protocol rules.
The Lightning Network works thanks to a Network of nodes (Peers) are connected to each other and form liquidity channels. To create a liquidity channel, you must first complete a transaction on the main chain. For example, User A forms a liquidity channel with User B for the equivalent of 1 million Satoshi or 0.01 BTC. Thanks to this channel, he can send a variety of payments according to his wishes. Depending on the type of transactions, 10 transactions of 100,000 satoshis, 100 transactions of 10,000 satoshis, or 1000 transactions of 1000 satoshis could be sent. This relationship is bidirectional; After User B receives money from User A, User B can send the money back to User A at will.
There is no limit to the number of transactions that can be made. However, once users A and B wish to end their trading relationship, the liquidity channel must be closed and an on-chain transaction must be made to determine the amount owed by each.
This means everyone is able to operate their own node and open your own channels. In fact, these days most users use services that do this for them. Lightning wallets connect to professional nodes that have plenty of liquidity and connections on the network. This means that a person who wants to make a payment via the Lightning Network, for example to buy a coffee, does not need a direct liquidity channel with the merchant.
Thanks to them Nature associated with Lightning and a payment forwarding method, the payment successfully finds its way from the customer to the merchant. Professional nodes that have a lot of liquidity obviously do so for commercial purposes and charge fees for routing payments.
A major challenge of the Lightning Network – the realignment of liquidity channels
The Lightning Network is far from a completed protocol and several players are working hard to resolve these issues. One of these issues is the constant need to rebalance liquidity in Lightning Network channels. Once a liquidity channel’s funds are depleted but payments still need to be made through it, few practical solutions are currently available. Here are the remedies to which Lightning Network users have been entitled to date.
Close the channel and open another one
Logically, it is possible to open a new liquidity channel at any time, but this entails additional fees and waiting times as it requires interaction with the Bitcoin network.
Realignment of liquidity
Each Lightning node consists of inbound and outbound liquidity, or the ability to receive and send payments. This is a complex aspect of the Lightning Network that is causing major headaches for Lightning node operators. It is possible to have a large liquidity inflow capacity without any liquidity outflows, and vice versa. In the event of such an imbalance, liquidity rebalancing must be carried out to keep operations functioning. This is done by moving liquidity as needed between other nodes and channels in the network. However, since this involves money movements, transaction fees must be expected. Furthermore, there is no guarantee that the requested liquidity will be available at this time.
As you can see, running a Lightning node is not an easy task Splice Take part in the game.
Le Splicing
Dusty demon is the creator of the first implementation of splicing and the method was finally tested in May 2022. Simply put, Splicing is about changing the size of the Lightning channels rather than rebalancing them. A user now has the choice to add or remove liquidity to their Lightning channel without having to close it or rebalance it using complicated methods.
Splicing is possible by introducing a trade transaction that invalidates the original channel creation transactions and eventually replaces them with new ones. This avoids closing the channel and having to resort to a new channel opening transaction on the main chain.
Advantages of splicing
The main advantages of splicing are that it can avoid closing liquidity channels only to open others, or having to perform complicated and potentially costly realignments. However, its inventor and several other developers have high hopes for this method to solve many other problems.
Better experience for the average user
On its website, Dusty Daemon explains that splicing abstracts the Lightning Network and the Bitcoin main chain. Many developers and companies believe that on-chain and Lightning Network scaling are too complicated concepts for the general public to understand. Ideally, a user should be able to use Bitcoin without having to worry about whether they are making a Lightning or on-chain transaction. Splicing makes the two networks more interoperable, which from a user perspective may eventually lead to their merger.
Better liquidity for node operators
An additional Lightning Channel management tool is always welcome for node operators to improve their liquidity offering. Splicing allows them to save costs, improve their uptime and service. The more efficient an operator is, the more likely users are to transact through its node, increasing its profits. This news was also received with enthusiasm and certain Lightning implementations have already integrated it. The Phoenix wallet, which uses an implementation of the Lightning Network from the French company ACINQ, has already implemented this functionality. They reported a 60% reduction in Lightning transaction fees for their users.
Diploma
Splicing is a revolutionary method of liquidity management on the Lightning Network that significantly improves the user experience. Since some companies have already started integrating this new method, we can expect splicing to be adopted by many wallets and Lightning node operators in the near future.
However, the limitations of this technique may prove to be greater than the benefits presented today, so it is important to continue to seek its further development.
https://lightningsplice.com/splicing_explained.html
https://volt.cloud/blog/lightning-network-faq/why-do-lightning-nodes-need-inbound-and-outbound-liquidity/#:~:text=So%20if%20your%20goal%20in, able to%20forward%20payments%20.
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