Channel Capacity in Lightning Network
What is channel capacity?
Channel capacity in Lightning Network is the total amount of satoshis deposited in that channel by participants when opening it. This capacity determines how much you can send or receive through the channel.
Types of capacity
Each node in a channel has two types of capacity: sending capacity and receiving capacity. These capacities complement each other between the two nodes in the channel.
Sending Capacity
It is the amount of satoshis you have available to send through the channel. It is also known as "local balance".
Receiving Capacity
It is the amount of satoshis you can receive through the channel. It is also known as "remote balance".
Practical example
If Alice has 300,000 sats on her side of the channel and Bob has 700,000 sats:
- Alice can send up to 300,000 sats to Bob, and can receive up to 700,000 sats from Bob
- Bob can send up to 700,000 sats to Alice, and can receive up to 300,000 sats from Alice
Sending and receiving capacities always add up to the total satoshis deposited in the channel.
Capacity management
As you perform transactions, your channel capacity becomes unbalanced. If you send many payments in one direction, you will eventually exhaust your sending capacity and need strategies to rebalance the channel.
Rebalancing strategies
- Circular rebalancing: Sending payments to yourself from one channel to another to move liquidity between channels.
- Submarine swap: Using services that allow draining or filling an existing channel for a small fee.
- Incoming channel opening: Asking others to open channels towards you.
- Spending funds: Making payments to move satoshis to the other side of the channel.
Incoming liquidity
When you unilaterally open a channel towards another person, all funds are initially on your side. This means you can only send payments, not receive. To be able to receive payments, you need incoming liquidity.
How to get incoming liquidity
- Incoming channels: Ask others to open channels towards you. Some companies like LN Big will automatically reciprocate.
- Liquidity services: Buy incoming liquidity from services like Lightning Pool.
- Submarine swap: Use services that exchange liquidity between channels.
- Automatic wallets: Some wallets like Breez and Phoenix automatically open channels as needed.
Common capacity problems
Insufficient capacity
If you try to send more satoshis than you have available in your sending capacity, the payment will fail.
Solution: Rebalance your channel or use MPP to split the payment.
Routing problems
When sending payments through the network, each channel in the route must have sufficient capacity to handle the payment amount.
Solution: The node will automatically search for alternative routes or split the payment using MPP.
Channel size and MPP
If you have a 1,000,000 sats channel and need to send 1,500,000 sats, you won't be able to do it with a single channel. This is where Multi-Path Payments (MPP) come in.
MPP allows using multiple channels controlled by a single user to route a transaction. For example, you could send 800,000 sats through one channel and 700,000 sats through another channel to complete the 1,500,000 sats payment.
This functionality is quickly becoming standard and greatly improves user experience and payment success rates.
Later we will explore MPP in detail and how it works in practice.
Ready to explore more?
Learn how payment channels are closed and what happens to funds when this occurs.