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January 04, 2018, 10:03:55 PM |
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Lately, there’s been a lot of discussion about a new concept called ‘Channel Factories.’ The technology ultimately makes the Lightning Network (LN) a ‘third layer’ and a ‘new layer’ rests in between the bitcoin blockchain and LN payment channels.
Last November three developers Conrad Burchert, Christian Decker, and Roger Wattenhofer published a paper called “Scalable Funding of Bitcoin Micropayment Channel Networks” which introduced the idea called ‘channel factories.’ In essence, the concept proposes to create a ‘Masterchannel’ which in turn allows LN users to open sub-channels in between. Users sub-channels can be opened and closed while the ‘masterchannel or factory’ remains open.
“In short, channel factories are payment channels that can be used to create more payment channels — That sounds weird, but it’s really pretty simple,” explains the software developer David Harding.
Ordinary payment channels are useful for individuals and entities with a lot of cryptocurrency liquidity or two parties who often transact together. Channel factories will make regular channels more efficient, and theoretically, the concept may save blockchain space and even more space if developers applied signature aggregation.
“Three party channel factories save 50% of the blockchain space,” details the micropayment channel network white paper.
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