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BITCOIN

Lightning splicing protocol cuts fees to rival Square's Bitcoin push

Thursday, April 2, 2026 · from 1 podcast
Bitcoin Optech
  • Lightning’s new splicing spec allows channels to be resized like altering a plane's wings in flight.
  • The upgrade collapses multiple channels into one balance, cutting user fees in half.
  • It positions the protocol to compete with Square’s new merchant payment rollout.

The Lightning Network just locked down a core upgrade that makes it a serious competitor to traditional payment rails. The splicing protocol, now officially part of the spec as BOLT 1160, lets users add or remove funds from a payment channel without closing it.

According to Bitcoin Optech, a spec merge only happens after a feature is successfully built and tested across multiple independent codebases. Three different implementations passed, moving splicing from experiment to production-ready standard.

For users, this solves the “channel mess.” Instead of managing dozens of tiny channels, a wallet can maintain a single, adjustable balance. Phoenix Wallet has already used splicing to cut its on-chain fees by 50%.

Dusty Daemon, Bitcoin Optech:

- Splicing at its core allows you to change the size of a Lightning channel.

- It is kind of like changing the size of the wings on a plane while it is flying.

The technical breakthrough is a new transaction engine called SpliceScript. It solves a recursive fee trap where adding funds to pay for a bigger transaction would itself increase the fee, creating a loop that could break simple wallets.

This efficiency arrives as Square begins rolling out Bitcoin payments to millions of US merchants. Splicing gives Lightning the low-cost, simple user experience needed to capitalize on that new wave of adoption. The protocol is no longer just a niche experiment; it’s building the plumbing for mainstream use.

ProtocolPaymentsAdoption

By the Numbers

  • 1160BOLT numbermetric
  • 50%fee reductionmetric
  • 8450PR numbermetric
  • 8856PR numbermetric
  • 8857PR numbermetric
  • 28.0.4Bitcoin Core versionmetric

Entities Mentioned

Adaptor signaturesProtocol
Bitcoin CoreProduct
Core LightningTool
EclairTool
EltooConcept
FROSTProtocol
Lightning Dev KitTool
LNDTool
PhoenixProduct
SegWitProtocol
TaprootConcept

Source Intelligence

What each podcast actually said

Bitcoin Optech
Bitcoin Optech

Bitcoin Optech: Newsletter #398 Recap • Mar 31

  • Dusty Damon, a long-time contributor, confirmed that BOLT 1160, which merges the splicing protocol into the Lightning spec, has been ratified.
  • A Lightning spec is merged only after a feature is implemented and tested across multiple implementations, analogous to HTML features working on multiple browsers.
  • Splicing was merged into the Lightning spec after successful implementation and testing across three different Lightning implementations.
  • Splicing allows users to change the size of a Lightning channel, which facilitates features like making on-chain payments directly from Lightning funds.
  • The Phoenix iPhone wallet uses splicing to manage a single channel per user, which resulted in a 50% reduction in fees and improved user experience.
  • Dusty Damon is now working on ancillary features enabled by splicing, such as merging multiple transactions (splices, channel opens, on-chain payments) into a single transaction.
  • Z-Man suggested that focusing on swapping over splicing would have been more efficient due to swapping's smaller block space usage.
  • A multi-channel splice involves more than one Lightning channel, encompassing actions like cross-channel splices or directing funds to cold storage.
  • `spliceout` will soon allow sending funds to any Bitcoin address, extending its current functionality of moving funds to an on-chain wallet or another channel.
  • Mike explained that Bitcoin transactions are public and do not use encryption, which is specifically about hiding information.
  • Bitcoin relies on digital signatures (ECDSA and Schnorr) to authorize spends without revealing private keys, using cryptographic math distinct from encryption.
  • Bitcoin Core now includes encrypted transport for communication between nodes, encrypting peer-to-peer traffic that was previously in plain text.
  • Bitcoin script gradually evolved to a commit-reveal structure, starting from Satoshi's raw public key design to Pay-to-Public-Key-Hash (P2PKH).
  • Pay-to-Script-Hash (P2SH) further extended commit-reveal by hashing spending conditions in the output and revealing the full script only at spend time.
  • Segwit and Taproot refined the commit-reveal approach, with Taproot being the most private by only revealing the specific script path used for spending.
  • Pay-to-Taproot (P2TR) multisig transactions reveal all public keys when spent via a script path due to the requirements of `OP_CHECKSIG` and `OP_CHECKSIGADD` opcodes.
  • For more private multisignatures, key-path spending in Taproot or emerging threshold signature schemes like FROST are viable alternatives.
  • `OP_CHECKSIGFROMSTACK` allows cross-UTXO signature reuse by signing an arbitrary message instead of binding to a specific transaction input.
  • This feature is foundational for rebindable transactions and advanced Layer 2 designs like LN-Symmetry, which could update channel states without old states becoming punishment vectors.
  • Bitcoin Core version 28.0.4 is a maintenance release that backports bug fixes related to unnamed legacy wallet migration failures that affected version 30.
  • Luke Dash Jr.'s DNS seed was removed from Bitcoin Core (PR #33723) due to non-compliance with DNS seed requirements.
  • Bitcoin Core PR 33259 adds a 'Background Validation' field to the `getblockchaininfo` RPC response for assumed UTXO nodes, providing visibility into prior block validation progress.
  • Bitcoin Core PR 33414 enables Tor proof-of-work defenses for automatically created Onion services, requiring clients to perform work to connect, mitigating attacks.
  • Bitcoin Core PR 34846 adds new functions to the `libbitcoinkernel` C API to easily retrieve `nLockTime` and `nSequence` fields for checking BIP34 rules without manual deserialization.

Also from this episode:

Lightning (13)
  • Large Lightning routing nodes use splicing to balance channels and manage one-way payment flows, potentially more than doubling throughput capacity.
  • Merging transactions via splicing could enhance privacy, reduce transaction costs, and improve blockchain efficiency.
  • Dusty Damon acknowledged that 'batch splicing' is challenging, citing difficulties in establishing reputation and preventing malicious actors in multi-party transactions.
  • Core Lightning PR 8450 extends its scripting engine to support cross-channel splices, which involve moving funds between different Lightning channels.
  • Dusty Damon's splicing engine in Core Lightning solves dynamic fee calculation, a complex problem where adding inputs for fees increases transaction size, demanding more fees in a recursive loop.
  • The splicing engine aims to be a standalone library, minimizing dependencies on Core Lightning, and can manage complex channel states, ensuring correct fee rates and balances.
  • The engine prevents potential fund loss scenarios ('foot guns') by preventing users from incorrectly interacting with partially signed Bitcoin transactions (PSBTs) via online services.
  • Core Lightning PRs 8856 and 8857 introduce `splicein` and `spliceout` RPC commands, allowing users to add funds to or remove funds from channels directly.
  • Core Lightning 26.04 Release Candidate 1 includes new splicing capabilities and adds an option for 'fronting nodes' in Bolt 12 offers to specify preferred routing peers.
  • Eclair PR 3247 introduces an optional peer scoring system to track forwarding revenue and payment volume, allowing nodes to auto-fund profitable channels or close unproductive ones.
  • LDK PR 4472 fixes a potential fund loss by ensuring transaction signatures are not released until the counterparty's commitment signature is durably persisted, securing channel state.
  • LND PR 10602 adds a `DeleteAttempts` RPC to its `Switch` RPC subsystem, enabling external controllers to manage and remove payment attempt records.
  • LND PR 10481 adds a Bitcoin Core (`bitcoind`) miner backend to LND's integration test framework, allowing tests for Bitcoin Core-specific features like V3 transaction relay.
ProtocolLightning

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