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A submarine swap is a trade between on-chain and off-chain digital assets (i.e. between Bitcoin held on-chain and Bitcoin on the Lightning network). At Purse, we have a unified wallet, meaning when you deposit or withdraw from your Bitcoin balance, you have the option to choose which method (on-chain or off-chain) you would like to send/receive funds. It all comes and goes from the same balance. When users try to use the Purse wallet system as an inexpensive swap service, by depositing Off-chain and then withdrawing On-chain, it drains our incoming liquidity on the Lightning Network and can ruin the experience for regular users. In order to combat this, we calculate a "swap fee" that is charged when we detect users trying to perform this type of swap. We try to be as fair as possible and most, if not all, of our regular users will never see this Swap Fee added to their On-chain withdraws.

However, if you do see a "swap fee" while making a withdraw, then we detected that you made a surplus of deposits off-chain and then tried to withdraw those deposits on-chain. We recommend that you instead withdraw those funds off-chain (and not incur any extra fees at all!). You could then use a swap service like Loop, Boltz, Submarine swap, etc to make your trade back to on-chain. You could also send your funds off-chain to an exchange like Kraken where you can then trade it. Or better yet, just keep your funds Off-Chain and keep enjoying the SUPER low fees!

Resources:
https://galoy.io/research-self-balancing-fee-structures-for-inbound-liquidity/
https://github.com/GaloyMoney/liquidity-fees-paper
https://docs.lightning.engineering/the-lightning-network/lightning-overview/understanding-submarine-swaps
https://blockonomi.com/submarine-swaps/
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