Definition
Channel capacity is the total amount of Bitcoin committed to a Lightning payment channel between two nodes. It is fixed at the moment the funding transaction confirms and can only change afterward through closing the channel or, more recently, through splicing. Capacity determines the maximum size of any single payment that channel can carry.
Outbound versus inbound
Capacity splits into two directional components. Outbound capacity is the Bitcoin on your side of the channel, representing what you can send. Inbound capacity is the Bitcoin on your peer's side, representing what you can receive. The sum of inbound and outbound always equals the total channel capacity, and every payment shifts the balance between the two without changing the total.
Why the split matters
When you open a channel, all funds begin on your side, giving you full outbound capacity but zero ability to receive. Sending payments moves balance toward your peer, simultaneously freeing up inbound capacity. Managing this directional balance is the central operational task of running a Lightning node, especially for merchants who need to receive more than they send.
Acquiring receive-side balance is covered under inbound liquidity, and you can resize a channel's total capacity without closing it via splicing.
In Simple Terms
Channel capacity is the total amount of Bitcoin committed to a Lightning payment channel between two nodes. It is fixed at the moment the funding…