A balanced channel is like a seesaw that’s perfectly level—both sides have enough capacity to handle payments in either direction. In a Lightning Network channel, you need local balance to send and remote balance to receive. If you’re a merchant with heavily inbound traffic, you’d want more remote capacity; if you’re a user who often pays out, you’d want more local capacity.

Striking that balance isn’t always easy, especially as payment flows shift over time. Tools like circular rebalancing or third-party liquidity services can help nudge a channel back to equilibrium. Keeping a channel balanced can reduce failed payments and provide a smoother Lightning experience, but it often requires monitoring or automated adjustments to stay that way.