State Channel
A state channel lets two parties transact privately off-chain as many times as they want, settling only the final result on the blockchain. Bitcoin's Light
A state channel lets two parties transact privately off-chain as many times as they want, settling only the final result on the blockchain. Bitcoin’s Lightning Network is a network of payment channels; the chain sees just the open and close.
Why it matters
Channels offer instant, near-free, private payments with no chain congestion — at the cost of locked-up funds and both parties staying online (or hiring watchtowers). They’re the oldest scaling idea in crypto and still the best fit for repeated micropayments between known parties.