State Channels Q&A

The Solution to Scaling Blockchain Now

If you’ve kept up with blockchain, you may be well aware that there is a race between competing technologies to scale their respective blockchains. In a recent tweet by Vitalik, he suggested the following five scaling strategies:

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What is a State Channel?

A state channel is something that allows work that would typically be done on the blockchain to be done elsewhere. This frees up the blockchain to handle additional work and increases overall throughput of the system.

What’s an Example of a State Channel?

One example of a state channel is where we handle payments between different parties. These “payment channels” have been discussed for years, and are exactly what the Bitcoin Lightning Network provides to Bitcoin.

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An example of a real-world payment channel

What are the Benefits of State Channels?

As you’re probably aware, blockchains are pretty slow — for instance, the Ethereum blockchain is only able to handle about 15 transactions per second. This really hinders Ethereum’s ability to handle any serious traffic — in fact, in January, “CryptoKitties” — a single application, completely backed up the blockchain to a point where it would take days to get a single transaction processed.

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  • Provide privacy to transactions — only you and the restaurant knew all the individual transactions between each other, the bank only knew the sum of the transactions.
  • Lower the cost of leveraging blockchain technology — every time you do a transaction involving the blockchain, you have to pay a fee. By migrating most of the transactions off of the blockchain, we lower that fee and make it less expensive to use.

Why Haven’t I Heard About These?

You have certainly heard of these before! As stated previously, the Bitcoin Lightning Network is a collection of payment channels where individuals validate transactions between themselves without having to pay fees or wait on the entire network to check that their transactions were valid. If you’ve heard of Raiden, it is doing the same thing for tokens on Ethereum.

Where can I Learn More?

Feel free to contact me on Twitter with any questions that you may have — I’ll be putting out additional articles on State Channels every week on Medium as well as code on my Github for implementing them within your applications.

Always Learning.

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