Splicing is the act of transferring funds from onchain outputs into a payment channel, or from a payment channel to independent onchain outputs, without the channel participants having to wait for a confirmation delay to spend the channel’s other funds.
Splicing comes in two varieties:
● Splice in means adding funds to a channel. In this case, a cooperative close of the channel is arranged between the involved parties that spends the old channel funds to a new channel along with the new deposit. Because the new channel open is based on the security of the old channel close, the channel participants can safely spend the old funds within the channel while waiting for the close and open transactions to confirm.
● Splice out means removing funds from a channel to an independent onchain output. Similar to splice-in, the channel is closed and a new channel is opened, with the remaining funds being secured by the old channel’s security until the new channel has fully confirmed.
Splicing is different from submarine swaps (such as those implemented by Lightning Loop) where funds are transferred between users in exchange for onchain transactions—in submarine swaps, the overall balance of the channel stays the same; in splicing, the overall balance of the channel changes.
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