If two parties want to make payments between themselves often, they can lock up some funds together in an on-chain transaction. Then they are able to bypass recording their subsequent payments with one another on-chain, by instead keeping track of each of their bitcoin balances in Lightning.
This is known as a payment channel, Lightning is essentially a network of payment channels which a sender’s payment can be routed through to reach any other beneficiary.
Method to send funds from an on-chain address directly into an open payment channel and vice versa.
Channel factories (WIP) #
A channel factory is a non-custodial, multi participatory system that contains channels. Channel factories allow users to open unlimited channels within their group.
Hosted channels (WIP) #
Hosted channels (HC) is an extension to LN protocol which allows two LN nodes to establish a new type of channel between them which is intentionally not backed on chain[^1].