- State Channel
A design pattern that allows the main blockchain to be used as a settlement layer for off-chain contracts. A state channel can be designed as a “payment channel” from one party to another, where all of the intermediate transactions do not need to be recorded on the main blockchain, only the final settlements do. Transactions executed on state channels function like a normal blockchain message; the key difference is that users must provide a digital key using the same private key associated with the address used to create the channel on the blockchain. Advantages include privacy, zero gas for sending transactions, and instant clearing. Additional privacy can be achieved through proxy hubs. State channels can also be linked together to form networks (Raiden or Lightning Network) or state chains.