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Loop feature released by Lightning Labs for Bitcoin payment Channels

Image Credit: MoonCatcherMeme

Lightning Labs recently released called “ Lightning Loop”  for Bitcoin payment channels. The new feature seeks to improvise on the usability of the lightning network. Additionally, users can receive a larger amount of  Bitcoin in Bitcoin payments, without the need to open new payment channels. 

This initial release is focused on the ability for people to receive with Loop Out. Lightning Loop Out will allow users to increase their receiving capacity by offloading funds from the network, while keeping channels open. 

Lightning Labs developers Alex Bosworth and Bryan Wu described in a blog post:

“Lightning channels are like tubes of money … Money moves around in the tube, but the total amount of funds remains constant. So, unlike other payment systems, Lightning requires ‘inbound capacity’ in order to receive funds.”

In order to open a payment channel, users need to pay the same fees and then wait for carrying out a regular Bitcoin transaction. On the other hand, with the lightning network, once the payment channel is open, a user can carry out a transaction instantaneously and at a fraction of the cost. These payment channels are usually set up by users and they have a fixed limit. 

With the newly added feature, users can withdraw the inbound capacity, thus they can use the same channel to receive Bitcoin payments. Also, the loop moves funds out of the channel into cold storage. 

 Bosworth and Wu explained in their post.

“This emptying of the channel allows [a lighting user] to receive more payments."

 The lead developers are also working on an opposite “Loop In” feature. This will enable payment channel refills with “on-chain bitcoin from wallets or exchanges.

“We believe Loop will contribute to the efficiency, scalability, and usability of Lightning. We encourage any Lightning developers, testers, and enthusiasts to begin trying Loop today,” they added.

 Product development director of bitcoin wallet Conio, Marco Pesani, said,

“Loop from [Lightning Labs] solves one of the biggest lightning network pain points: channels liquidity management … I’ve never seen so many advancements and such focus on the final objective. Massive.”

Lightning Loop software and protocol are open source and MIT-licensed, while the server-side is fully verifiable through its use of Bitcoin contracts. 

Loop Out transactions are limited to a maximum of 0.01 BTC (1M sats) for this initial release. Additionally, no usage fees will be charged during the alpha, however, on-chain fees will apply.