Understanding the Concept of State Channels

What are state channels?

How do state channels operate?

  1. The participants lock up a certain part of the state to send money to a multi-signature contract that can accept Ether and pay all parties.
  2. Every participant in the state channel sign the transactions and then send them to each other. Each of them creates and keeps a copy of the signature for future reference.
  3. Each transaction takes place so that a chronological order of all the transactions is maintained for the smart contract.
  4. After the participants have conducted the transaction via the state channels, they close it by submitting the last update.
  5. Followed by updating and unlocking the state, the remaining balance is sent to the participants by the smart contract.



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