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Liquidity | Bitcoin Glossary | Mapping Bitcoin

Liquidity

Lightning

Also known as: inbound liquidity, outbound liquidity

In the Lightning Network context, the availability of funds in payment channels to route transactions in a given direction. Inbound liquidity refers to funds on the remote side that can receive payments, while outbound liquidity refers to local funds available to send.

Overview

Liquidity on the Lightning Network describes the availability and distribution of funds within payment channels. Unlike on-chain bitcoin, which can be sent to anyone at any time, Lightning payments require that sufficient funds exist on the correct side of a channel along the payment route.

Inbound vs. Outbound Liquidity

         Alice's Channel with Bob
┌────────────────────────────────────┐
│  Outbound (Alice)  │ Inbound (Alice)│
│  ████████████       │     ░░░░░░░░  │
│  (Alice can send)  │ (Alice can     │
│                    │  receive)      │
└────────────────────────────────────┘
   Alice's balance      Bob's balance

Total capacity = Outbound + Inbound
  • Outbound liquidity: The funds on your side of a channel. This is how much you can send.
  • Inbound liquidity: The funds on the remote side. This determines how much you can receive.

Why Liquidity Matters

A new Lightning node that opens channels and funds them entirely from its own wallet will have plenty of outbound liquidity but zero inbound liquidity — meaning it cannot receive any payments. Obtaining inbound liquidity is one of the key challenges for new nodes and merchants.

Managing Liquidity

Node operators use several strategies to balance liquidity: opening channels with well-connected peers, using liquidity marketplaces, performing circular rebalancing (sending a payment to yourself through a loop of channels), or using submarine swaps to move funds between on-chain and Lightning.

Common Misconceptions

Many new users believe that channel capacity equals their spendable balance. In reality, the capacity is split between two sides, and only the local side represents spendable funds. A channel with 1 BTC capacity might only have 0.1 BTC available to send if the rest sits on the remote side.

Términos Relacionados

Capacity (Lightning)Lightning

The total amount of bitcoin locked in a Lightning Network channel, representing the maximum value that can be transferred through that channel. Capacity is split between the two channel partners and shifts as payments flow in each direction.

Lightning ChannelLightning

A two-party payment channel on the Lightning Network created by locking bitcoin in a 2-of-2 multisig on-chain transaction. Once open, the channel allows the two parties to make unlimited fast, low-cost payments between each other off-chain.

Rebalancing (Lightning)Lightning

The process of adjusting the distribution of funds across Lightning Network channels to improve routing capacity. Rebalancing can be done by sending a circular payment through the network or using submarine swaps to shift liquidity between on-chain and off-chain.

Routing (Lightning)Lightning

The process of finding a path through the Lightning Network's graph of payment channels to deliver a payment from sender to recipient. Routing nodes forward payments and can earn small fees for providing this service.