Adversarial Question: Now that LND Loop is paid product, what stops someone from forking the software and selling the product themselves, or integrating it freely?

The only reason I can think of is that Loop is still maturing as a product, and that it is LND who will bring it to maturity, so it makes sense to stay with the proprietors. But that's not even relevant when the service becomes mature.


LND Loop is an open-source solution with MIT Licence. So, you are free to fork the code and create your own solution without any restrictions. In fact, there are a number of submarine swap companies out there that offer you a solution to import/export liquidity from your channel. LND Loop will just be one amongst a sea of such solutions. Market share winners and losers would be differentiated from their customer service and how they are going to tailor the solution to the customer needs.

A classic example to consider is Docker. Its code is completely open source (Apache 2.0 license) for Linux distributions and you can fork it if you want. However, Docker has raised $307.9M in funding to date and has a valuation in billions. They make money through their enterprise editions, docker hub and other professional services.

In my opinion, a similar analogy can be drawn for lightning. In the future, the company that will be able to handle huge requests of loop-ins and loop-outs without sacrificing time will grab a majority market share. They will have to tailor their solution to their customers and provide the best service possible. This will require considering multiple factors including good backend technology to handle the load, good professional services and if the company is able to handle enterprise implementations for their Lightning payment needs. They will also need to figure out liquidity and fluctuations in market price of Bitcoin to handle such operations. Offering all the services at a low cost is what is going to differentiate the competition. Forking off the code is just the first small step.

  • This answer is incorrect. I have no idea why it's marked as correct answer. Loop server is not open source. 2nd paragraph doesn't apply because, again, loop server is not open source. – pseudozach Feb 26 '20 at 5:34

LND loop server is not open source. You can interact with Loop from LND which is open source. On the other hand there are already other commercial products that offer submarine swaps as a service. You also can not offer a loop service for free because someone still needs to bear the costs of moving funds from off-chain to on-chain or vice versa. You could compete with LND with lower fees.

  • Loop is on github and it seems there are non-lnd developers making commits. I don't doubt you, but could you explain this? – Paul Kania Feb 7 '20 at 0:42
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    If you read the repo the key sentence there is "This repository is home to the Loop client..". So this is the loop client included in LND. The loop server, which actually does the submarine swap operation is not open source. – pseudozach Feb 8 '20 at 6:29

The problem isn't software related. All of the off-chain options invariably require a custodian to be managing the funds. Whether that is you on your own node, or Bluewallet, or other 3rd party app/option. The stated purpose of 2nd layer/offchain "solutions" is (ostensibly) to reduce the cost of casual transactions, and hasten an acceptable standard of "confirmed" status for txs for use-cases such as billing for streaming, and retail commerce.

The problem is this. Although the use of off-chain txing will temporarily reduce the cost of tx fees, invariably the cost per tx will continue to increase. Without increasing block-space to reduce the cost of txs, you're still competing for space in those blocks. In addition, the subsidy is continuing to reduce with each halving. This means miners will need to seek their due in the form of tx fees. I believe this means that eventually all private ln nodes (like your's) will be dusted as the tx fees eclipse their off-chain balances, and you will not be able to afford to establish new payment channels because you won't be able to afford the tx fees to have your initializing tx included in a block.

What this means for competitors for Loop is that unless you can cover the tx fees, and put up enough Bitcoin to make opening the payment channel worth doing, you'll be forced to rely on the services of 3rd party payment service providers. I'm assuming that because they just received $10 million in series A funding that they are going to be able to afford to put up more Bitcoin than you, or I ever could.

If you can see a flaw in this thesis, please feel free to let me know. They just block me on twitter, and reddit when I say stuff like this.

  • RE: paragraph #2 - I believe your points are sensationalist but plausible. I think it's too early to say, especially with entire technologies that have yet to come to fruition, but are expected to [channel factories for instance] RE: being banned - Could you point me to some discussions on twitter or reddit where you've been told you'll be blocked/banned? In twitter blocks are swift, so it's plausible you've been blocks here and there. On reddit I sincerely doubt that you've blocked without warning if your behavior/prose is similar on those forums as it is here. – Paul Kania Feb 7 '20 at 16:34
  • Can you tell me what is going to prevent the miner fees from increasing beyond what you can afford to spend on them? The Bitcoin reddit my posts have been removed from/hidden/not visible anymore were on like r./Bitcoin or r/btc. It's been so long since I'd bothered trying that I couldn't tell you which one it was. – Frank Dashwood Feb 8 '20 at 0:49

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