Payment channels
Two people lock bitcoin together, trade instant balance updates, and settle on-chain once.
In plain words
A channel opens with one on-chain transaction locking bitcoin that only both people together can move. After that, payments are just the two of you re-signing an updated balance — instant, free, as many as you like. Either side can leave at any time by publishing the latest balance to the blockchain. Cheat with an old one, and you lose 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 between two people.
- The cheating penalty means you don't have to trust your channel partner.
- Channels chained together are what make Lightning a network.
Go deeper
- Lightning Network
- Liquidity
- Lightning vs on-chain
Updated 2026-07-29