# State Channel

> A way for two or more users to transact off-chain and only settle the final balance on the main chain.

Canonical URL: https://fudfomo.co/glossary/state-channel
Source: What The Block! Dictionary v1.0 (last updated 2026-04-25), browsable at https://wtb.fudfomo.co.

## Definition

A state channel is a private agreement between participants to update a shared balance between themselves without writing each step to the blockchain. Only the opening and closing settle on chain.

State channels are great for high-frequency interactions between known counterparties, like payment channels or game updates. They struggle when participants do not know each other in advance or when they need to involve many parties at once.

## Related terms

- [Layer 2](https://fudfomo.co/glossary/layer-2): A faster, cheaper network built on top of a layer 1 like Ethereum. Borrows the main chain's security.
- [Lightning Network](https://fudfomo.co/glossary/lightning-network): A layer 2 for Bitcoin that lets users send fast, cheap payments through a network of payment channels.
- [Ethereum](https://fudfomo.co/glossary/ethereum): A blockchain that lets developers build apps and issue tokens. Often called a programmable money platform.

## See the full catalogue

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