What is Lightning Liquidity?
Understand how liquidity works on the Lightning Network and why it matters for sending and receiving payments.
Liquidity is the lifeblood of the Lightning Network. Without it, you can't send or receive payments. Understanding how liquidity works is essential for anyone using Lightning.
What is Liquidity?
On the Lightning Network, liquidity refers to the amount of Bitcoin that's available to move through payment channels. Think of it like water in pipes – you need water on both ends to make it flow.
When you open a Lightning channel, you're essentially creating a pipe between your node and another node. The Bitcoin you put into that channel becomes your liquidity.
Why Does Liquidity Matter?
Here's the key insight: the amount you can send or receive is limited by your channel's liquidity.
- To send payments: You need liquidity on YOUR side of the channel (outbound liquidity)
- To receive payments: You need liquidity on the OTHER side of the channel (inbound liquidity)
📊 Example
You open a 1,000,000 sat channel and fund it with your Bitcoin. Initially:
- ✅ You can send up to 1,000,000 sats
- ❌ You can receive 0 sats (no inbound liquidity yet)
After you spend 400,000 sats, those sats move to the other side:
- ✅ You can send up to 600,000 sats
- ✅ You can receive up to 400,000 sats
The Liquidity Challenge
This creates a chicken-and-egg problem for new Lightning users:
- You want to receive Bitcoin over Lightning
- But you need inbound liquidity first
- To get inbound liquidity, someone else needs to open a channel TO you
- Or you need to spend Bitcoin first to "make room" on your side
This is exactly the problem that Lightning Service Providers (LSPs) like LOM solve. We open channels to you, giving you instant inbound liquidity so you can receive payments right away.
Types of Liquidity
Outbound Liquidity
Bitcoin on YOUR side of the channel. Lets you send payments. You get this by funding channels yourself.
Inbound Liquidity
Bitcoin on the OTHER side of the channel. Lets you receive payments. You get this when someone opens a channel to you.
How LOM Helps
Lightning Octopus Mumu provides liquidity services to help you get started on Lightning:
- Inbound channels: We open a channel to you, giving you instant receiving capacity
- Outbound channels: You open a channel to us, connecting to a well-routed node
Whether you're an individual, a business, or an AI agent, having reliable liquidity is the first step to using Lightning effectively.