A Lightning payment channel is a 2-of-2 multisig output plus signed, unbroadcast transactions that record the latest balance. Learn how channels work.
Open, update, close
- Open: one or both parties send bitcoin into a 2-of-2 multisig output. That's the funding transaction.
- Update: for each payment, both sign a new commitment transaction that would pay out the new balances. They keep it but don't broadcast it.
- Close: eventually one commitment, or a cooperative closing transaction, goes on-chain and pays each side.
Why you can't cheat with an old balance
Each new commitment comes with a way to punish the old one. If Bob broadcasts an outdated commitment where he had more money, Alice has a window (a CSV timelock) to claim all of the channel's funds using a revocation secret Bob gave her. See Closing channels and watchtowers.
Capacity
The channel's total capacity is fixed by the funding transaction. Payments only move the balance between sides, which is why liquidity matters.
Find a channel on-chain
A cooperative channel close looks like an ordinary transaction spending a 2-of-2 output into two payouts. With Taproot channels, even the open can look like a normal single-key payment.
Channel capacity in practice
| Capacity | Good for |
|---|---|
| 100,000 sats | Testing and tiny payments |
| 1,000,000 sats | Everyday personal use |
| 10,000,000+ sats | Merchants and routing nodes |
Key takeaways
- A channel is funded by a 2-of-2 multisig output.
- Updates are signed commitment transactions kept off-chain.
- Publishing an old state lets the other side take all the funds.
Common questions
How many payments can a channel handle?
Unlimited, as long as the balance allows.
Can I add funds to an open channel?
With 'splicing', supported by some implementations, yes. Otherwise you open another channel.
How much does it cost to open a channel?
One on-chain transaction fee to open and another to close; everything in between is off-chain.
Can a channel run out?
Your side can run low after many payments. You can receive to refill it, or open another channel.