Payment Channels

Definition ∞ Payment channels are off-chain scaling solutions that allow multiple cryptocurrency transactions to occur between two parties without recording each individual transaction on the main blockchain. Instead, only the opening and closing transactions are settled on the main chain, significantly reducing fees and increasing transaction speed. This technology addresses the scalability limitations of many base-layer blockchains. It offers a method for high-frequency, low-value transfers.
Context ∞ News regarding payment channels frequently discusses their role in improving blockchain scalability and enabling micropayments. Current efforts focus on expanding their adoption beyond specific applications like the Bitcoin Lightning Network to other blockchain ecosystems. Future developments include more sophisticated channel designs that support multi-party interactions and complex conditional payments, broadening their utility in decentralized commerce.