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The purpose of this document is to explain Lightning Network channels and liquidity principles to help BlockSpaces users to make informed decisions regarding their Bitcoin Invoicing & Payments instances. Liquidity and channel management concepts are critical for the Lightning Network to function, and in turn enable customers to send and receive off-chain Bitcoin payments.
Channels
The most important thing to understand about the Lightning Network is the concept of a channel. A channel is a payment path between two Lightning nodes. In other words, bitcoin sent over the Lightning Network travels through a channel (or series of channels) to reach its destination. A new channel from a new Lightning node is typically funded using an on-chain Bitcoin transaction.
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