Payment Channel

       A payment channel is a closed communications channel that is established between multiple parties that bring activity off-chain. 

     Within the world of blockchain and cryptocurrency, when activity is brought off-chain the operational efficiencies needed for transactions become theoretically limitless. Whenever a cryptocurrency transaction takes place, the blockchain on which those currencies exist is prompted to process the transaction. Typically, this is a process that requires a substantial amount of time and computational power; however if the same transactions are executed in a payment channel they happen near-instantaneously and at near-zero cost. 

Payment channels are a common technique used in second layer technologies such as counterfactual, lightning network, and plasma.

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