Lightning Labs has announced their new featured looking at improving the salability of the lightning network. This new feature called the “Lightning Loop” will allow users to send and receive Bitcoin in larger capacities without the need to shut and reinstate new channels.
The process to create a channel on the lightning network is similar to sending a normal transaction over the Bitcoin network. However once the payment channel is created, users will be able to transact virtually instantaneously at a much lower cost. Lightning channels can be seen as a virtual pipe for Bitcoin.The more you pipe through the channel by sending, the more you can receive. Once inside the channel Bitcoin can move around freely, but the total amount of funds within remain the same. This creates the problem of “inbound capacity” when it comes to receiving funds. As stated by the developers Alex Bosworth and Bryan Vu in the blog release:
This initial release focuses on on the ability for people to receive with what we call Loop Out. Lightning Loop Out allows users to increase their receiving capacity by offloading their funds from the network while keeping channels open.
The lightning loop will specifically allow funds to be moved outside of the payment channel and into a bitcoin wallet, cold storage, or fiat currency via an exchange. This emptying of the channel allows users to receive more payments, while still continuing transactions and looping out again. As a result, new recipients on the network no longer need to rely on others to open channels with them, before they’re able to start receiving payments.
Lightning Labs developers Alex Bosworth and Bryan Vu also pointed out that in their next release, they plan to implement the Loop In feature. This will enable users to refill their Lightning channels with on-chain bitcoin from wallets or exchanges. As a user creates a series of transactions using the Lightning network, their channel balance decreases. They can then use Loop In to refill the funds on Lightning from a regular on-chain bitcoin wallet or an exchange account, and continue to add additional funds as necessary.
The vision for Lightning Loop is to allow users to securely move funds in and out of the Lightning Network using non-custodial Bitcoin contracts. With Loop, users, businesses, and routing node operators are able to keep Lightning channels open indefinitely, making the network more efficient, more stable, and cheaper to use. We believe Loop will contribute to the efficiency, scalability, and usability of Lightning.