Lightning splicing upgrade cuts fees and fuels micropayments
Apr 2, 2026Thursday, April 2, 2026Summary from 3 contributing podcasts.
- A core protocol upgrade makes Lightning cheaper and more stable by merging fragmented user balances.
- This enables a new wave of streaming apps for music and media with near-zero fees.
- Square is defaulting Bitcoin payments on for millions of merchants, hiding the complexity.
A long-awaited technical fix is now a core part of Bitcoin's Lightning Network. Splicing, which lets users add or remove funds from a payment channel without closing it, is officially part of the Lightning specification after cross-implementation testing.
On Bitcoin Optech, Dusty Daemon explained the practical impact. Splicing collapses a user's dozens of small channels into one seamless balance, cutting on-chain fees by half. The Phoenix iPhone wallet already uses it. This solves the channel mess, a major friction point for mainstream adoption.
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 fee reduction and simpler user experience are accelerating new applications. On Plebchain Radio, Nat Cole argued for a "new music economy" built on Lightning. It revives the peer-to-peer spirit of Napster or BitTorrent but replaces clunky file-sharing with automated, sub-cent streaming payments to artists, bypassing closed platforms like Spotify.
Adoption is already happening in the background. As reported on Bitcoin And, Square has flipped a switch, making Bitcoin payments via Lightning the default setting for millions of US merchants. David Bennett noted the merchant never touches the Bitcoin; Square handles the conversion to dollars, shielding sellers from volatility and tax complexity.
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.
Splicing moves Lightning from a patchwork of technical workarounds toward a unified payment layer. The next wave of apps will rely on it to feel as frictionless as mainstream alternatives.
Source Intelligence
- Deep dive into what was said in the episodes
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.
- 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.
- 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.
Also from this episode: (14)
Adoption (14)
- 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.
- 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.
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.
Also from this episode: (13)
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.
Adoption (1)
- 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.
Sunday Brunch 12: Guest Host Aaron of Essex with Nat Cole • Mar 29
- Modern value-for-value tech revives the Napster-era peer-to-peer model, but replaces BitTorrent with instant Lightning Network micropayments.
Also from this episode: (6)
Society (3)
- Nat Cole distinguishes Spotify's closed-loop 'ecosystem' from a 'new music economy' built on permissionless, direct participant interaction.
- The bottleneck for Bitcoin-backed music is curation, not tech, requiring a fan base and digital 'radio' networks to surface quality.
- Cole argues the 'New Music Economy' term distances the movement from the reputational baggage of 'crypto' and 'NFTs.'
Adoption (2)
- Cole's 'New Music Economy' vision uses Bitcoin's settlement layer to give artists economic access without platform permission.
- Aaron of Essex notes the supply side is ready, with protocols built and artists across genres uploading tracks to permissionless platforms.
V4V (1)
- Apps like Wave Lake and Fountain have proven the concept, but a killer app with Spotify-level UX is still needed for mainstream adoption.