Payment channels are off-chain constructs that let two parties exchange many bitcoin transactions while only recording opening and closing balances on the blockchain.
Semantic Classification
Content
- A payment channel locks funds in a multisignature output on the blockchain, after which the two parties update their respective balances by exchanging signed transactions off-chain. Only the final state is settled on the chain when the channel closes.
- Linking many channels into a network allows payments to be routed between parties who do not share a direct channel, which is the basis of the Lightning Network.