State Channel

A state channel is an off-chain scaling method in which two or more participants lock funds in an on-chain smart contract, then exchange signed updates directly between themselves — instantly and without fees — returning to the blockchain only to open or close the channel. The chain acts as a court rather than a cashier: because every update is signed and numbered, any participant can submit the latest one to settle if the other stops cooperating. That makes state channels well suited to repeated interactions between fixed parties, such as payments or turn-based games. The trade-offs are real: funds stay locked while the channel is open, participants must stay online or delegate a watchtower to challenge outdated states, and each new counterparty needs a new channel.