Payment Channel

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A bidirectional and trustless payment channel is the core building block of the Lightning Network. There are 3 well known methods to construct payment channels.

Poon Dryja Channels[edit]

The Poon Dryja channels are the ones that are currently being implemented in the lightning network. They punish malicious behaviour with a penalty based revocation based system making use of RSMCs and are presented and discussed in the lightning network whitepaper

Decker Wattenhofer[edit]

Based on the idea of invalidation trees and first presented on the ETH Zurich in A Fast and Scalable Payment Network with Bitcoin Duplex Micropayment Channels

Eltoo[edit]

Eltoo tries to reduce the complexity of the penalty based payment channels by dynamically binding settlement transactions to funding transactions. While elegant this method requires a bitcoin softfork. Eltoo was first presented via Blockstream in this publication