👉 The Simple Lightning Newsletter - How Payment Channels Work? - #1 The Basics

How Payment Channels Work? - #1 The Basics

Payment channels, sometimes referred to as micropayment channels, are a trustless method of exchanging funds peer-to-peer. On the Bitcoin network, payment channels lock funds into a 2-of-2 multi-signature address that allows the two parties to exchange bitcoin off of the blockchain.
As bitcoin scales, more users will opt to transact their bitcoin in payment channels to opt out of on-chain transaction fees.

  • The Cost of On-chain Transactions
  • What are Payment Channels?
  • How do Payment Channels Work?
    • Channel Open: The Funding Transaction
    • Payments in the Channel: Commitment Transactions
    • Channel Close: The Settlement Transaction