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19 lines
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Plaintext
19 lines
1.3 KiB
Plaintext
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Will be merged later into chapter 6 or 7, as the book is reorganized
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[[state_channels]]
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=== State Channels
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_State channels_, or _payment channels_ are a system of smart-contract based virtual channels that enable payments to be exchanged between two parties that do not need to trust each other, with settlement via transactions on the blockchain.
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In the simplest form, a state channel is made by constructing a sequence of time-locked transactions with incrementing value. This is a one-way state channel between two parties. A one-way channel like this is useful for making off-chain micro-payments in return for delivery of a metered service, such as streamed video or Wifi service.
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More complex state channels can be used to build bi-directional off-chain payments between two parties. These are useful for maintaining a running balance between two parties without having to commit transactions to the bitcoin blockchain.
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Finally, state channels can be linked together to form a routed multi-hop network of payments between multiple parties. Such a network can support a much higher volume of transactions, each of very small value (micro-payments), for much lower cost than the equivalent transactions on the bitcoin blockchain. Yet, the trust is entirely
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