Flash Channels are the IOTA version of Bitcoin’s Lightning or Ethereum’s Raiden. It is an offline payment channel for deposits and withdrawals that enables instantaneous, high-throughput transactions. This is possible because there are only two transactions in the IOTA Tangle, opening and closing a flash channel. Essentially, they provide a way for the two counterparties to trade at high frequency without waiting for each transaction to be confirmed on the public IOTA network.
Flash channel or a very similar feature will eventually be part of IOTA Streams. Two people can interact using microtransactions outside the Tangle by providing collateral in advance to a mutually controlled address. However, this only works for 1:1 payments.
Last Updated on 16. February 2021