Inbound and outbound
In a channel, the balance on your side is what you can send: outbound liquidity. The balance on the other side is what you can receive: inbound liquidity. A fresh channel you funded alone is all outbound. To receive, someone must have funds on the other side.
Routing has the same constraint at every hop: a large payment needs a path where every channel has enough balance in the right direction. That is why big Lightning payments fail more often than small ones.
Custodial or not
- Custodial wallets: a company runs the channels and holds the funds. Easiest to use, but the bitcoin are theirs until you withdraw.
- Self custodial wallets: your keys, your channels. Many use a service provider (LSP) to open channels and supply inbound liquidity for you.
A Lightning address looks like an email, name@domain, and lets people pay you without asking for an invoice each time. Behind it, the wallet still creates a fresh invoice for every payment.