Lightning Loop

Lightning Loop is a non-custodial service offered by Lightning Labs to bridge on-chain and off-chain Bitcoin using submarine swaps. This repository is home to the Loop client and depends on the Lightning Network daemon lnd. All of lnd’s supported chain backends are fully supported when using the Loop client: Neutrino, Bitcoin Core, and btcd.

In the current iteration of the Loop software, two swap types are supported:

• off-chain to on-chain, where the Loop client sends funds off-chain in
• on-chain to off-chain, where the Loop client sends funds to an on-chain address using an off-chain channel

We call off-chain to on-chain swaps, a Loop Out. The service can be used in various situations:

• Acquiring inbound channel liquidity from arbitrary nodes on the Lightning network
• Depositing funds to a Bitcoin on-chain address without closing active channels
• Paying to on-chain fallback addresses in the case of insufficient route liquidity

We call our on-chain to off-chain swaps, a Loop In. This allows you to use on-chain funds to increase the local balance of a channel, effectively "refilling" an existing channel.

Potential uses for Loop In:

• Refilling depleted channels with funds from cold-wallets or exchange withdrawals
• Servicing off-chain Lightning withdrawals using on-chain payments, with no funds in channels required
• As a failsafe payment method that can be used when channel liquidity along a route is insufficient

Development and Support

The Loop client is currently in an early beta state, and offers a simple command line application. Future APIs will be added to support implementation or use of the Loop service.

The Loop daemon exposes a gRPC API (defaults to port 11010) and a REST API (defaults to port 8081).

The GitHub issue tracker can be used to request specific improvements or register and get help with any problems. Community support is also available in the LND Slack .

Setup and Install

LND and the loop client are using Go modules. Make sure that the GO111MODULE env variable is set to on.

In order to execute a swap, you need to run a compatible lnd version built with the correct sub-servers enabled.

LND

To run loop, you need a compatible version of lnd running. It is generally recommended to always keep both lnd and loop updated to the most recent released version.

If you are building from source make sure you are using the latest tagged version of lnd. You can get this by git cloning the repository and checking out a specific tag:

git clone https://github.com/lightningnetwork/lnd.git
cd lnd
git checkout v0.x.x-beta

Once the lnd repository is cloned, it will need to be built with special build tags that enable the swap. This enables the required lnd rpc services.

make install tags="signrpc walletrpc chainrpc invoicesrpc"

Check to see if you have already installed lnd. If you have, you will need to delete the .macaroon files from your lnd directory and restart lnd.

Do not delete any other files other than the .macaroon files

// Example on Linux to see macaroons in the default directory:
ls ~/.lnd/data/chain/bitcoin/mainnet

This should show no .macaroon files. If it does? Stop lnd, delete macaroons, restart lnd.

lncli stop

Now delete the .macaroon files and restart lnd. (don't delete any other files)

Loopd

After lnd is installed, you will need to clone the Lightning Loop repo and install the command line interface and swap client service.

git clone https://github.com/lightninglabs/loop.git
cd loop/cmd
go install ./...

Execute a Swap

After you have lnd and the Loop client installed, you can execute a Loop swap.

The Loop client needs its own short-lived daemon which will deal with the swaps in progress.

Command to start loopd::

loopd

// Or if you want to do everything in the same terminal and background loopd
loopd &

// For testnet mode, you'll need to specify the network as mainnet is the
default:
loopd --network=testnet

By default loopd attempts to connect to the lnd instance running on localhost:10009 and reads the macaroon and tls certificate from ~/.lnd. This can be altered using command line flags. See loopd --help.

loopd only listens on localhost and uses an unencrypted and unauthenticated connection.

Loop Out Swaps

Now that loopd is running, you can initiate a simple Loop Out. This will pay out Lightning off-chain funds and you will receive Bitcoin on-chain funds in return. There will be some chain and routing fees associated with this swap.

NAME:
   loop out - perform an off-chain to on-chain swap (looping out)

USAGE:
   loop out [command options] amt [addr]

DESCRIPTION:

  Attempts to loop out the target amount into either the backing lnd's
  wallet, or a targeted address.

  The amount is to be specified in satoshis.

  Optionally a BASE58/bech32 encoded bitcoin destination address may be
  specified. If not specified, a new wallet address will be generated.

OPTIONS:
   --channel value               the 8-byte compact channel ID of the channel to loop out (default: 0)
   --addr value                  the optional address that the looped out funds should be sent to, if let blank the funds will go to lnd's wallet
   --amt value                   the amount in satoshis to loop out (default: 0)
   --conf_target value           the number of blocks from the swap initiation height that the on-chain HTLC should be swept within (default: 6)
   --max_swap_routing_fee value  the max off-chain swap routing fee in satoshis, if not specified, a default max fee will be used (default: 0)
   --fast                        Indicate you want to swap immediately, paying potentially a higher fee. If not set the swap server might choose to wait up to 30 minutes before publishing the swap HTLC on-chain, to save on its chain fees. Not setting this flag therefore might result in a lower swap fee.

It's possible to receive more inbound capacity on a particular channel (--channel), and also have the loop daemon send the coins to a target address (addr). The latter option allows ones to effectively send on-chain from their existing channels!

loop out <amt_in_satoshis>

This will take some time, as it requires an on-chain confirmation. When the swap is initiated successfully, loopd will see the process through.

To query in-flight swap statuses, run loop monitor.

Fees explained

The following is an example output of a 0.01 BTC fast (non-batched) Loop Out swap from testnet:

$ loop out --amt 1000000 --fast
Max swap fees for 1000000 sat Loop Out: 36046 sat
Fast swap requested.
CONTINUE SWAP? (y/n), expand fee detail (x): x

Estimated on-chain sweep fee:        149 sat
Max on-chain sweep fee:              14900 sat
Max off-chain swap routing fee:      20010 sat
Max off-chain prepay routing fee:    36 sat
Max no show penalty (prepay):        1337 sat
Max swap fee:                        1100 sat
CONTINUE SWAP? (y/n):

Explanation:

• Max swap fees for sat Loop Out (36046 sat): The absolute maximum in fees that need to be paid. This includes on-chain and off-chain fees. This represents the ceiling or worst-case scenario. The actual fees will likely be lower. This is the sum of 14900 + 20010 + 36 + 1100 (see below).
• Estimated on-chain sweep fee (149 sat): The estimated cost to sweep the HTLC in case of success, calculated based on the current on-chain fees. This value is called miner_fee in the gRPC/REST responses.
• Max on-chain sweep fee (14900 sat): The maximum on-chain fee the daemon is going to allow for sweeping the HTLC in case of success. A fee estimation based on the --conf_target flag is always performed before sweeping. The factor of 100 times the estimated fee is applied in case the fees spike between the time the swap is initiated and the time the HTLC can be swept. But that is the absolute worst-case fee that will be paid. If there is no fee spike, a normal, much lower fee will be used.
• Max off-chain swap routing fee (20010 sat): The maximum off-chain routing fee that the daemon should pay when finding a route to pay the Lightning invoice. This is a hard limit. If no route with a lower or equal fee is found, the payment (and the swap) is aborted. This value is calculated statically based on the swap amount (see maxRoutingFeeBase and maxRoutingFeeRate in cmd/loop/main.go).
• Max off-chain prepay routing fee (36 sat): The maximum off-chain routing fee that the daemon should pay when finding a route to pay the prepay fee. This is a hard limit. If no route with a lower or equal fee is found, the payment (and the swap) is aborted. This value is calculated statically based on the prepay amount (see maxRoutingFeeBase and maxRoutingFeeRate in cmd/loop/main.go).
• Max no show penalty (prepay) (1337 sat): This is the amount that has to be pre-paid (off-chain) before the server publishes the HTLC on-chain. This is necessary to ensure the server's on-chain fees are paid if the client aborts and never completes the swap after the HTLC has been published on-chain. If the swap completes normally, this amount is counted towards the full swap amount and therefore is actually a pre-payment and not a fee. This value is called prepay_amt in the gRPC/REST responses.
• Max swap fee (1100 sat): The maximum amount of service fees we allow the server to charge for executing the swap. The client aborts the swap if the fee proposed by the server exceeds this maximum. It is therefore recommended to obtain the maximum by asking the server for a quote first. The actual fees might be lower than this maximum if user specific discounts are applied. This value is called swap_fee in the gRPC/REST responses.

Fast vs. batched swaps

By default, Loop Outs are executed as normal speed swaps. This means the server will wait up to 30 minutes until it publishes the HTLC on-chain to improve the chances that it can be batched together with other user's swaps to reduce the on-chain footprint and fees. The server offers a reduced swap fee for slow swaps to incentivize users to batch more.

If a swap should be executed immediately, the --fast flag can be used. Fast swaps won't benefit from a reduced swap fee.

Loop In Swaps

Additionally, Loop In is now also supported for mainnet as well. A Loop In swap lets one refill their channel (ability to send more coins) by sending to a special script on-chain.

NAME:
   loop in - perform an on-chain to off-chain swap (loop in)

USAGE:
   loop in [command options] amt

DESCRIPTION:

    Send the amount in satoshis specified by the amt argument off-chain.

OPTIONS:
   --amt value          the amount in satoshis to loop in (default: 0)
   --external           expect htlc to be published externally
   --conf_target value  the target number of blocks the on-chain htlc broadcast by the swap client should confirm within (default: 0)
   --last_hop value     the pubkey of the last hop to use for this swap

The --external argument allows the on-chain HTLC transacting to be published externally. This allows for a number of use cases like using this address to withdraw from an exchange into your Lightning channel!

A Loop In swap can be executed a follows:

loop in <amt_in_satoshis>

Fees explained

The following is an example output of a 0.01 BTC Loop In swap from testnet:

$ loop in --amt 1000000
Max swap fees for 1000000 sat Loop In: 1562 sat
CONTINUE SWAP? (y/n), expand fee detail (x): x

Estimated on-chain HTLC fee:         154 sat
Max swap fee:                        1100 sat
CONTINUE SWAP? (y/n):

Explanation:

• Estimated on-chain HTLC fee (154 sat): The estimated on-chain fee that the daemon has to pay to publish the HTLC. This is an estimation from lnd's wallet based on the available UTXOs and current network fees. This value is called miner_fee in the gRPC/REST responses.
• Max swap fee (1100 sat): The maximum amount of service fees we allow the server to charge for executing the swap. The client aborts the swap if the fee proposed by the server exceeds this maximum. It is therefore recommended to obtain the maximum by asking the server for a quote first. The actual fees might be lower than this maximum if user specific discounts are applied. This value is called swap_fee in the gRPC/REST responses.

Resume

When loopd is terminated (or killed) for whatever reason, it will pickup pending swaps after a restart.

Information about pending swaps is stored persistently in the swap database. Its location is ~/.loopd/<network>/loop.db.

Authentication and transport security

The gRPC and REST connections of loopd are encrypted with TLS and secured with macaroon authentication the same way lnd is.

If no custom loop directory is set then the TLS certificate is stored in ~/.loop/<network>/tls.cert and the base macaroon in ~/.loop/<network>/loop.macaroon.

The loop command will pick up these file automatically on mainnet if no custom loop directory is used. For other networks it should be sufficient to add the --network flag to tell the CLI in what sub directory to look for the files.

For more information on macaroons, see the macaroon documentation of lnd.

NOTE: Loop's macaroons are independent from lnd's. The same macaroon cannot be used for both loopd and lnd.

Multiple Simultaneous Swaps

It is possible to execute multiple swaps simultaneously. Just keep loopd running.

API Support Level

Server

The Loop server API and on-chain scripts are kept backwards compatible as long as reasonably possible.

Client

When breaking changes to the Loop client daemon API are made, old fields will be marked as deprecated. Deprecated fields will remain supported until the next minor release.