Overview
In the Lightning Network, capacity refers to the total amount of bitcoin committed to a payment channel by its two participants. This capacity sets the upper bound on the value that can flow through the channel. The capacity is established when the channel is opened via an on-chain funding transaction and remains fixed until the channel is closed or spliced.
Inbound vs Outbound Capacity
A channel's total capacity is divided into two sides:
Total Channel Capacity: 1,000,000 sats
┌─────────────────────────────────────────────┐
│ Alice's side Bob's side │
│ (outbound for Alice) (outbound for Bob)│
│ (inbound for Bob) (inbound for Alice)│
│ │
│ ████████████░░░░░░░░░░░░░░░░░░░░░░░░░░░░ │
│ 600,000 sats 400,000 sats │
└─────────────────────────────────────────────┘
After Alice sends 200,000 sats to Bob:
┌─────────────────────────────────────────────┐
│ ████████░░░░░░░░░░░░░░░░░░░░░░░░░░░░░░░░ │
│ 400,000 sats 600,000 sats │
└─────────────────────────────────────────────┘
- Outbound capacity: The amount a participant can send through the channel
- Inbound capacity: The amount a participant can receive through the channel
Why Capacity Matters
Capacity determines the practical usefulness of a Lightning channel:
- A merchant who wants to receive payments needs sufficient inbound capacity
- A user who wants to make payments needs sufficient outbound capacity
- Payment routing nodes need balanced capacity on both sides to effectively relay payments
Managing Capacity
Several techniques exist for managing channel capacity:
- Circular rebalancing: Sending a payment to yourself through a circular route to shift capacity between channels
- Submarine swaps: Converting on-chain bitcoin to Lightning capacity (or vice versa)
- Splicing: Adding or removing funds from an existing channel without closing it (a more recent protocol feature)
Common Misconceptions
Channel capacity is not the same as a user's total Lightning balance. A user may have multiple channels with different capacities. Also, the public capacity visible on the network graph does not reveal how that capacity is distributed between the two channel partners; only the total is publicly known.