What is Payment channel?
A two-party contract funded by an on-chain transaction, inside which balances can be updated repeatedly without touching the chain.
Each update is a fully signed transaction that either party could broadcast, with mechanisms that penalise broadcasting an outdated one. Cooperative closes settle the final balance in a single on-chain transaction.
Channels are the primitive Lightning is built from: a route is a series of channels through which a payment hops atomically.
Related terms
Lightning Network
A network of payment channels built on Bitcoin that settles small payments off-chain, using the base layer…
Lightning & scalingRouting (Lightning)
Finding a path of channels with enough liquidity in the right direction to carry a payment from sender to…
Lightning & scalingOn-chain
A transaction recorded in a Bitcoin block, as opposed to one settled off-chain in a channel or inside a…
This definition is part of the Bitcoin Logical glossary. For the fuller explanation, start with Learn, or see the live numbers on The Bitcoin Signal.