Overview
State channels are like keeping a running tab at a bar. You and another party open a channel, exchange many signed transactions privately, and then 'close' the tab by sending the final result to the blockchain.
Key Example
The Lightning Network for Bitcoin is the most famous state channel implementation, allowing for nearly instant and free micro-payments.
Benefits
- Instant: No waiting for block confirmations.
- Privacy: Only the opening and closing transactions are visible on the public ledger.
- Zero/Low Cost: No fees for the intermediate transactions.