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BITCOIN

Lightning's splicing upgrade makes Bitcoin usable for millions of merchants

Thursday, April 2, 2026 · from 2 podcasts
Bitcoin OptechBitcoin And | Bitcoin & E…
  • Square is enabling Bitcoin payments by default for millions of US sellers, using the Lightning Network.
  • Splicing is now a ratified Lightning spec, collapsing channel management into a single balance.
  • The upgrade cuts user fees in half and solves a major liquidity friction point.

The Lightning Network just became useful enough for real commerce.

The key technical upgrade is splicing - ratified this week as Bolt 1160 in the Lightning specification - which lets users add or remove funds from a payment channel without closing it. Dusty Daemon of Bitcoin Optech called it "changing the size of the wings on a plane while it is flying." This solves the network's core usability problem: channel fragmentation.

Phoenix Wallet already uses splicing to manage a single channel per user, cutting fees by 50% and turning what was once a mess of dozens of tiny channels into a unified balance.

This maturity arrives as Square, owned by Block, flips a switch for millions of its US merchants. The company is moving its Bitcoin integration from an opt-in setting to a default-on status. David Bennett noted on Bitcoin And that the system is designed to settle in US dollars by default, shielding merchants from volatility and tax complexities. A soap maker at a farmer’s market can now passively accept Bitcoin as a payment rail without ever touching the asset.

David Bennett, Bitcoin And:

- I can walk up to a square merchant today and unless that square merchant has purposely gone through the settings and turned off all Bitcoin functionality, then I will have the option to pay that invoice in Bitcoin or lightning.

- Square accepted the Bitcoin, not the merchant, which is an important distinction for the Internal Revenue Service.

This creates a massive, passive expansion of the network. The merchant friction is gone. The technical friction for users is being cut in half. The long-predicted usability barrier for mainstream Bitcoin payments is crumbling from both the merchant and consumer sides simultaneously.

AdoptionLightningPayments

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
BitmainCompany
BLOCKSPACESCompany
ChainalysisCompany
Core LightningTool
EclairTool
EltooConcept
FROSTProtocol
Lightning Dev KitTool
LNDTool
PhoenixProduct
SegWitProtocol
SquareCompany
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.
  • Large Lightning routing nodes use splicing to balance channels and manage one-way payment flows, potentially more than doubling throughput capacity.
  • 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.
  • Merging transactions via splicing could enhance privacy, reduce transaction costs, and improve blockchain efficiency.
  • Z-Man suggested that focusing on swapping over splicing would have been more efficient due to swapping's smaller block space usage.
  • 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.
  • A multi-channel splice involves more than one Lightning channel, encompassing actions like cross-channel splices or directing funds to cold storage.
  • 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.
  • `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.
  • 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.
  • 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.
  • 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
Bitcoin And | Bitcoin & Economic News
Bitcoin And | Bitcoin & Economic News

When VCs Attack! | Bitcoin News • Mar 31

  • Square is automatically enabling Bitcoin payments for eligible US sellers, shifting from an opt-in to a default-on setting.
  • Square's rollout leverages the Lightning Network for near-instant transactions, abstracting volatility for merchants who receive USD.
  • David Bennett argues Square's automatic Bitcoin acceptance shields merchants from IRS complexities, as Square, not the merchant, accepts the crypto.
  • A proposed US Department of Labor rule creates a safe harbor for 401(k) fiduciaries offering crypto, covering a participant-directed market of $8.8 trillion.

Also from this episode:

Protocol (6)
  • A Google quantum AI paper claims breaking Bitcoin's encryption may require fewer than 500,000 physical qubits, below prior estimates of millions.
  • Google researchers designed attack methods requiring roughly 1,200 to 1,450 high-quality qubits, a fraction of earlier estimates.
  • The paper suggests a quantum attacker could have a 41% chance of beating a Bitcoin transaction by calculating the private key in about nine minutes.
  • Google's paper estimates 6.9 million Bitcoin, roughly a third of the supply, sit in wallets where the public key has been exposed.
  • The paper argues Bitcoin's 2021 Taproot upgrade expanded vulnerability by making public keys visible on-chain by default.
  • David Bennett suggests the quantum research, promoted by Nick Carter's Project 11, is a potential precursor to calls for faster Bitcoin blocks.
Markets (2)
  • Nakamoto sold 284 Bitcoin for $20 million in March, implying an average sale price of around $70,400 per coin.
  • Nakamoto's sale came at a roughly 20% discount to its year-end 2025 valuation of $87,519 per Bitcoin.
Stablecoins (2)
  • Standard Chartered reports stablecoin velocity has roughly doubled over two years, with tokens now turning over about six times per month.
  • Standard Chartered maintains its projection that stablecoin supply will reach $2 trillion by 2028, generating $1 trillion in demand for US Treasury bills.
Mining (2)
  • The Mined in America Act proposes certified domestic miners could sell newly mined Bitcoin to the US government in exchange for a capital gains tax exemption.
  • The bill highlights a national security risk, noting 97% of specialized Bitcoin mining hardware is produced by Chinese firms like Bitmain and MicroBT.
AI & Tech (1)
  • Chainalysis is introducing AI-powered blockchain intelligence agents trained on over a decade of its proprietary transaction data.
AdoptionRegulationMiningMacro