Liquidity

In business, liquidity usually refers to the ability to meet short-term obligations. In markets, liquidity refers to the ability to trade assets at a given price. For instance, we might refer to Bitcoin as a liquid asset if we are able to buy and sell large quantities of it without significantly moving the market price.

In the context of this guide, liquidity refers to the ability to move funds, which is an important concept for routing payments in the Lightning Network. To be able to route payments, and collect routing fees, you will want your funds to be as liquid as possible, or otherwise be compensated for the illiquidity.

In this article, we explore the concept of liquidity in the Lightning Network and describe ways to better manage it.