Foundations of Blockchain

Off-chain state channels

A state channel is a two-way communication between the members of a system that enables the members to perform a series of transactions without committing them to the blockchain. Off-chain transactions tremendously increase the throughput by avoiding blockchain confirmation for every transaction.

Off-chain channels are ideal for micro-transactions where two parties communicate their transactions by setting up a payment channel that is independent of the blockchain state. The state channel can be closed once the transactions between the parties are concluded. The final state of the channel is then sent to the blockchain.

Figure 9.1 shows a payment channel that is created between Alice and Bob. Alice and Bob will then ...