Glossary
Definitions, in the sense this course uses them. Where a term is used differently elsewhere, that is said rather than glossed over: half the confusion in Lightning is two people using one word for two things.
Capacity
The total amount committed to a channel’s funding output when it was opened. It does not change for the channel’s lifetime — there is no top-up. Adding funds means opening another channel.
Frequently used loosely to mean “how much I can send”, which is outbound liquidity and is a different number.
Local balance · outbound liquidity
Your side of a channel. What you can send. The two terms are used interchangeably; this course prefers outbound liquidity when the point is what it lets you do, and local balance when the point is where the money sits.
Remote balance · inbound liquidity
The other side. The room you have to receive. Every satoshi of inbound is a satoshi that is not outbound, which is the whole of why liquidity management exists.
Channel reserve
A percentage of capacity, conventionally 1%, that each side may never spend. It exists so that neither party ever has nothing to lose by publishing an old state. It is small, it is easy to forget, and it is why a rebalance sized to “the whole balance” fails.
Commitment transaction
A signed, unpublished bitcoin transaction that spends the funding output and pays each side its current balance. Each party holds one. Making a payment means signing a new pair and revoking the old.
HTLC
Hashed Time-Locked Contract. The construction that lets a payment cross a channel between parties who do not trust each other: the money moves only against a preimage, and returns automatically if the preimage never arrives.
ppm
Parts per million of the amount moved. 214 ppm on 1 000 000 sats is 214 sats. Fee policy is quoted this way because it is scale-free — a fee in satoshis tells you nothing without the amount.
Base fee
A flat charge per forwarded payment, in millisatoshis, on top of the ppm rate. Small in absolute terms and large in relative terms on small payments, which is why a high base fee quietly excludes a node from micropayment routes.
Rebalancing
Paying yourself in a circle to move the line between local and remote balance without closing anything. It costs the routing fees of every hop on the outbound leg. See what a rebalance costs for what that is in practice.
Force close
Publishing your commitment transaction unilaterally, because the other side is unreachable or uncooperative. Funds are recoverable but time-locked, and the on-chain fee is whatever the transaction committed to when it was last signed.
This course treats force-close material as operations content, which means it is reviewed line by line before publication and says so on the page. A wrong instruction here costs money.
Watchtower
A third party you pay, or ask, to watch the chain for a revoked commitment transaction published by your channel partner while you are offline, and to broadcast the penalty on your behalf.
Whether the public ones answer is a measurable question rather than a matter of opinion. See ln.watch.
Route · path
A sequence of channels a payment traverses. Path is the sequence; route is the path plus the amounts and expiries at each hop. The distinction matters only when reading the BOLTs, where it is observed strictly.
Gossip
The peer-to-peer flood of channel announcements and updates from which every node builds its own view of the network. Nobody has the true graph; everybody has a slightly stale approximation of it, and pathfinding failures usually mean somebody’s approximation was wrong.
BOLT
Basis of Lightning Technology — the specification documents. Numbered, and worth reading in the order 1, 2, 4, 7 rather than 1 through 11.