Payment channels

In plain words

A channel opens with one on-chain transaction locking coins that only both parties together can move. From then on, payments are the two of you re-signing an updated balance — instant, free, unlimited. Either side may leave at any time by publishing the latest balance. Cheat with an old one and you forfeit everything in the channel. Bitcoin is the courtroom. The channel is where business happens.

Why it matters

• One on-chain transaction buys unlimited instant payments.
• The penalty replaces trust: your partner cannot profit by cheating.
• Channels chained together are what make Lightning a network.

Go deeper

• Lightning Network
• Liquidity
• Lightning vs on-chain