On Scalability — From Payment-Channels to State-Channels

It is well known to many, that blockchains, in their current design, can’t scale up to the worlds requirements. The Lightning network (aka Raiden in Ethereum) is supposed to solve this issue for payments with bitcoins (or ether), via creating a network of payment-channels. If Bitcoin succeeds to upgrade, then there can be theoretically almost infinite amount of transactions per second. Bitcoin might just stay as it is now though. The incentive to stay the same and not to break anything is too big (“never touch a running system”).

Jeff Coleman nicely describes the idea of having state-channels instead of simple payment-channels in his blog post http://www.jeffcoleman.ca/state-channels/

“W hat it all ultimately breaks down to is that participants open the channel by setting up a “judge” smart contract, sign promises to each other which the judge can enforce and adjudicate if necessary, and then close the channel by agreeing amongst themselves so that the judge’s adjudication isn’t needed. As long as the “judge” mechanism can be assumed to be reliable, these promises can be counted as instant transfers, with the judge only appealed to in exceptional circumstances, such as when one party disappears.” — Jeff Coleman in his seminal blog post ‘State Channels’.

With æternity, state-channels are build into the core blockchain. No upgrade required. This way æternity assures from day one to scale up to the worlds needs, and to bank all unbanked. Also corporations will profit from state-channels. Privacy gets greatly increased by not having all the transactions, code and state on-chain.

More on æternity’s state channels in one of the following blog-posts. Meanwhile please have a look into the whitepaper or our website for more information, also about other innovative features of æternity.