Splicing

Splicing is a feature in the Lightning Network that allows users to add or withdraw bitcoin from their payment channels without closing them, reducing channel interruptions. Also, splicing is cost-effective, as it avoids the additional on-chain transaction fees required when closing and reopening channels. Additionally, splicing is valuable for the liquidity management of channels, allowing users to keep the channels active and refill channels with a low balance.

LND, the most popular Lightning implementation does not yet support splicing.

For example, Alice and Bob frequently transact using the Lightning Network and have a channel with 0.5 BTC each. Alice wants to increase her channel capacity to handle larger transactions, so she initiates a splicing operation to add an additional 0.5 BTC. Instead of closing the current channel and opening a new one, a new on-chain transaction is created that includes the existing balance and the new funds. This transaction is broadcast to the Bitcoin network and confirmed, updating the channel’s capacity to 1.5 BTC without interrupting ongoing operations.