Glossary / Lightning & layer 2
Channel capacity
- Definition
- Channel capacity is the total amount of bitcoin locked in a Lightning channel's funding output, which is the ceiling on what the two peers can move between them, not the amount you can spend.
Capacity is fixed the moment the funding transaction confirms. It is the sum of both sides' balances, and it never changes as payments flow back and forth, only the split does. Beginners read a headline capacity figure and assume it is their spending power, then discover that most of it sits on the other side.
How it works
Channel capacity is set by the funding amount and announced to the whole network, while the split inside it stays private.
When two nodes open a channel, one or both of them pay satoshis into a shared output. That number is the capacity. If your peer later sends you half of it, the capacity is unchanged; what moved is the boundary between your local balance and their remote balance. The public gossip message that announces a channel points at the funding output, so anyone can look up the total, but nobody outside the channel can see who currently holds what.
Three deductions sit between capacity and what you can actually send. The first is the channel reserve, which the specification suggests setting at 1 percent of the channel total and which neither side may ever spend, because it is the collateral that makes cheating unprofitable. The second is fees: the side that opened the channel pays the on-chain fee of the eventual commitment transaction out of its own balance. The third is the dust threshold, 330 satoshis for the output type channels use, below which a balance cannot be represented as its own output at all.
Capacity also has a hard upper bound unless both peers opt out of it. The specification caps funding below 2^24 satoshis, which is 16,777,216 satoshis or roughly 0.1678 BTC, and channels larger than that require both sides to negotiate the large channel option, informally called wumbo. Alongside the total there is a separate limit on how much can be in flight at once: no more than 483 pending payments per side, because every pending payment adds an output to the transaction that would enforce the channel on chain.
Where you see it
Capacity is the number every Lightning explorer, node dashboard and wallet screen leads with.
A node ranking on a public explorer sorts by total capacity, the sum of all a node's channels, which is a rough proxy for how much traffic it can carry and a poor proxy for how reliable it is. A node with 5 BTC spread over 200 balanced channels routes better than a node with 5 BTC in two channels pointing the wrong way.
Inside a wallet, capacity is usually hidden behind two friendlier numbers: what you can send and what you can receive. Add those together and you are close to the capacity, minus reserve and fee headroom. If a mobile wallet tells you that you can send 480,000 satoshis and receive 20,000 in a channel it opened for you, the capacity is about 500,000 and you are nearly out of room to be paid.
Capacity also decides what a channel costs to create. Opening a 500,000 satoshi channel and a 5,000,000 satoshi channel cost the same on-chain fee, because the transaction is the same size either way. That is why service providers push you toward one larger channel rather than several small ones, and why splicing, which resizes a channel in place, matters.
Channel capacity vs inbound liquidity
Channel capacity is the size of the container; inbound liquidity is how much room is left on your side to receive. A brand new channel you funded yourself with 1,000,000 satoshis has 1,000,000 of capacity and close to zero inbound liquidity, so you can spend the lot and cannot be paid a single satoshi. Spend 400,000 of it and the capacity is still 1,000,000, but your inbound liquidity is now 400,000. Capacity is the fixed number in the gossip; inbound liquidity is the moving one that decides whether an incoming payment succeeds.