Bi-directional Payment Channel

A bi-directional payment channel is a tool in cryptocurrency that allows two parties to conduct multiple transactions off the blockchain without needing to make individual transactions on the blockchain each time. This helps reduce costs and processing times associated with regular on-chain transactions.

The process involves both parties committing a certain amount of cryptocurrency to the payment channel, which is then held in escrow. The two parties can then exchange funds back and forth as many times as they want within the channel before eventually closing it out and settling their final balances on the blockchain.

By enabling two-way transactions within a secure off-chain channel, bi-directional payment channels offer a quick and efficient way for parties to exchange cryptocurrency without the need for every single transaction to be recorded on the public blockchain. This can be particularly useful for frequent or small-value transactions between two parties who trust each other or have an ongoing business relationship.