The Lightning Network is well known as an off-chain Bitcoin payment protocol that offers faster and cheaper transactions. Now, it has announced a related service called Loop, which will make it easier for users to receive a continuous flow of funds. This will also ensure that payment channels stay open. Lightning explains the current situation:
“Lightning channels are like tubes of money: the more you send the more you can receive, and the other way around. Money moves around in the tube, but the total amount of funds remains constant … Lightning requires ‘inbound capacity’ in order to receive funds.”
Right now, users are responsible for ensuring that their channels have a large enough capacity to handle incoming payments. Often, that involves opening a new channel when a previous channel reaches its capacity. It is possible to refill and rebalance channels, but this is not straightforward. Loop will make things easier.
How Loop Works
Loop manages Lightning channel capacities in two ways. “Loop Out,” which is…