Statechains work very well with the Lightning Network and in fact, could be an easy solution to onboarding new users. Why is this? Statechains make Lightning much more flexible, allowing you to seamlessly add and or remove people from the channel without ever having to touch the main chain. As well as Statechains can be turned into Lightning channels at will. Let's say you want to set up a Lightning channel with someone, you would then have to first have available funds on the statechain. Then simply change the Statechain UTXO into a shared Lightning channel and BOOM! There you have it! This new technology can be advantageous as you can open and close channels with ease since you don't have to put anything on-chain.

Opening a channel but don't know how much liquidity you might need? Statechains provide a useful solution to this problem. You can open and close channels very cheaply, allowing you to open a channel with a small UTXO (then realize later on you may need more liquidity) and transfer it to a larger UTXO. Closing the channel when you’re all done with it as well with minimal costs. Because this is not only cheap but efficient, developers and testers can get creative and really test out new experiments they may have not been able to before. I'm really excited to see what creative ideas and solutions people will get from this!

While you use Statechains and Lightning together at the same time, the protocols are still kept separate. This is still true when closing the chain, as the Statechain does not need to be involved because both parties do not need to know about the transaction. The Statechain is somewhat hidden from this transaction although it can see that the UTXO has been transferred.

Statechain is blinded and can't see what it's signing

Privacy is also taken another step further with Blind Statechains. There was the first problem of the statechain knowing about your transactions and broadcasting them for anyone and everyone to see. But since you can swap UTXOs around, it makes your transactions similar to a Coinjoin. Built into this is also blind signatures. As you can see in the diagram to the left, the statechain can’t exactly see what it's signing. It could be someone sending money, it could be something completely different. All it see’s is there is a transaction to sign, so it does so. This helps with increasing privacy so much since you can transfer the rights to a private key safely and securely without ever having to change the actual key itself.

Overall I’m really optimistic about the future of off-chain scaling and other creative ways we will be able to transact in. As time goes by and the number go up, we will see a new wave of smart and passionate Bitcoiners come into space with fresh ideas on how to tackle problems. I have no doubt in my mind that any hiccups in Statechains and other layer two solutions will get smoothed out and get fixed in the long term. Cheap solutions that help with privacy get me so bullish on Bitcoin AND Bitcoiners I can’t even verbally express it.

Thanks for reading and have a great rest of your day homies!

Works Cited:

Song, Jimmy, director. Statechains, a Semi-Trusted Layer-2 Protocol! Bitcoin Tech Talk Issue #181. Statechains, a Semi-Trusted Layer-2 Protocol! Bitcoin Tech Talk Issue #181, YouTube, 30 Mar. 2020, https://youtu.be/ZdKhNv4l5Bs.

Wirdum, Aaron van. “Statechains: Sending Keys to Scale Bitcoin Off-Chain.” Bitcoin Magazine, 8 Jan. 2020, bitcoinmagazine.com/articles/statechains-sending-keys-not-coins-to-scale-bitcoin-off-chain.