— —
Follow on X
LESSONS

Splicing, swaps and liquidity ads

Submarine swaps move value between chain and Lightning trustlessly. Splicing resizes an open channel in place. Dual funding and liquidity ads solve the inbound problem at open.

5 MIN READ
Submarine swaps, splicing in and out, dual funding and liquidity ads.
LEVEL · Advanced
IN THIS LESSON · 5 OF 6
BY THE END YOU WILL BE ABLE TO ANSWER
  • What does a splice-out do?
  • What problem do liquidity ads address?

Then prove it: a 2-question quiz. The lesson marks itself complete at 100%.

Submarine swaps

A trustless exchange between an on-chain payment and a Lightning payment, built from the same HTLC idea: you pay on-chain to an HTLC; the swap provider pays you over Lightning; revealing the preimage settles both. Used to move savings onto Lightning, to drain a channel to cold storage, and by wallets to fill inbound liquidity ("loop in" and "loop out").

Splicing

Historically, changing a channel's size meant closing and reopening: two on-chain transactions and downtime. Splicing replaces the funding output with a new one in a single transaction while the channel keeps operating. Splice in adds funds (say, from cold storage); splice out withdraws (say, to pay an on-chain invoice) without closing. Implemented in several clients and spreading.

Dual funding and liquidity ads

In the original protocol only the opener funded a channel, so new nodes had no inbound liquidity. Dual funding lets both sides contribute at open. Liquidity advertisements let nodes publish a price for inbound liquidity; a wallet can open a channel and buy inbound in the same transaction. Consumer wallets use these, or equivalent services, so first-time users can receive.

Channel factories and the future

Proposals would let many channels share one on-chain output, cutting the on-chain cost of onboarding users; some depend on covenant soft forks. For now, splicing and swaps already make a Lightning balance something you can grow and shrink without touching the chain much.

CHECK YOURSELF
1/2 What does a splice-out do?
2/2 What problem do liquidity ads address?
pick an answer for each question

SOURCES

  1. Lightning Network specifications (BOLTs)
Progress is saved in this browser only.