Payment Channel
payments · layer-2 · scaling
A protocol that locks funds on-chain while participants exchange authorized balance updates off-chain before final settlement.
A payment channel lets two or more participants commit funds in an on-chain transaction, exchange signed state updates without publishing every payment, and later settle a permitted final state on-chain.
Channels can be one-way or bidirectional, and networks can route payments across linked channels. Designs differ in how they fund capacity, revoke or supersede old states, handle timeouts, and respond when a participant is offline.
Channels can reduce on-chain activity for repeated payments, but they require liquidity, state management, and reliable settlement access. Routing can fail, funds may be unavailable while committed, and some protocols require users or watch services to monitor the chain for outdated closes.
Related terms
Lightning Network
→A Bitcoin payment-channel network that routes off-chain balance updates and settles channel state on-chain.
bitcoin · layer-2 · payments
Hash Time-Locked Contract (HTLC)
→A conditional payment that can be claimed with a secret before a deadline or refunded after the deadline.
smart-contract · payments · cryptography
Timelock
→A spending rule that prevents a transaction or output from being used until a specified time or block height.
scripting · bitcoin
Multi-Signature (multisig)
→A spending policy that requires a defined threshold of several keys or signers.
security · wallet