Sorry if this is a rather stupid question. Is the loop closed between the servo motor and driver or does it pass through the machine controller? Can a closed loop servo system be used as a spindle motor on a lathe to enable basic thread cutting function with a controller that does not accept encoder feedback?
I can answer the question of closed vs. open loop in a broad sense, but not specifically for any given system. It's a bit simplified but hopefully gives enough info for the purposes here.
Open Loop:Typically used with steppers because they have explicit angular "steps" where they may be held in position. The controller assumes that when it sends out a pulse (with direction signal), the motor achieves the desired position. With a correctly specified system that is functioning within designed parameters, this is a perfectly valid assumption.
However, with "hobby CNC" you typically try to buy the cheapest or most readily available components. Little or no design/engineering is performed to make sure that things have proper specs, so you usually end up with under-powered motors that can't be relied upon to position the system under load or high speed.
Closed Loop:Any system that has a control signal and feedback. In terms of CNC, we're usually talking about servos - which are essentially a motor that can be energized to spin either direction at various speeds/torque. In a working system, the speed/torque is dictated by the controller, which figures out how much speed/torque and in which direction. It does this by looking at the feedback signal, most commonly a rotary encoder of whatever flavour you prefer. The rotary encoder enables the controller to know how far the motor (servo) has rotated
It's still possible to under-power the system, but it becomes obvious very quickly when you're trying to tune the system. If an axis falls behind where it's supposed to be (similar to "missed steps" when talking about stepper motors) the controller knows and can flag an error and/or shut down the system.
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Answering your thread cutting question, the controller needs to have feedback to coordinate all axes involved in the motion. So I'd say that coordinated thread cutting would not be possible without feedback to the controller. There may be a TACH/RPM input that could provide some limited functionality.