What is the difference between capacity and max_htlc in the routing of payments in the network?

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The capacity of a channel is the number of satoshis that are stored in the payment channel. They are split between the two channel partners and offered htlcs. No payment larger than the capacity can ever go through that channel.

The max_htlc is the number of concurrent offered htlcs that are possible in the channel. They are limited because most htlcs are outputs in the commitment transaction and cost a fee paid to the miners in case the channel has to be force closed.

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