Channel Factories – a new layer for Bitcoin

Recently, a new technology is making its presence noticed.

It is called ‘Channel Factories’ and it is supposed to work as an intermediary layer between Lightning Network and Blockchain.

Few months ago, a team of developers implemented a new idea where a master channel was created to allow the Lightning Network users to open other derived channels, also called sub-channels. These could be opened or closed, as long as the master channel remains open. The channel factories can also be used as a mean of creation for other payment channels. It might sound weird or complicated, but the reality is different. Once the initial payment channel has had enough confirmations, the release of another channel will happen instantly.

How does it work?

Basically, with Channel Factories, the Lightning Network will work as a third layer and a there will be a new layer separating the virtual currency’s blockchain and Lightning Network payment channels.

The secondary payment channels can be utilized as usual channels (for example in payments made through Lightning Network), but the difference stands in the moment they are closed.

With a ‘channel factory’, a lot of space from Blockchain can be preserved, this way increasing the efficiency of transactions. The space saved is so big with this concept, that three channel factories could save up to 50% of Blockchain space.