Channel factories

Channel factories are a multi-user contract capable of opening payment channels without putting the channel-open transaction onchain.

For example, three users create a channel factory by each of them depositing some funds to an onchain 3-of-3 multisig address. Using non-broadcast (offchain) spends from that address, they open payment channels with each other (e.g. Alice↔Bob, Alice↔Charlie, and Bob↔Charlie). They can then use those channels with the same security as if they had opened them onchain because, if necessary, they can broadcast the channel-open transactions. However, they don’t need to broadcast those transactions if both parties act cooperatively, allowing them to reduce the amount of block chain data used.

For large numbers of users under ideal situations, channel factories can reduce the onchain size and fee cost of LN by 90% or more.

Primary code and documentation

• Scalable Funding of Bitcoin Micropayment Networks

Optech newsletter and website mentions

2022

• Proposed new channel construction to improve compatibility with channel factories
• Proposed OP_EVICT opcode to make channel factories more efficient

2021

• Inherited identifiers proposal with an alternative channel factory design

2019

• Discussion of output tagging and its effect on eltoo and channel factories

2018

• 2018 year-in-review: eltoo lays groundwork for channel factories

  
  

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