LibraryInteroperability2018Design paperCorpus record
Scalable Funding of Bitcoin Micropayment Channel Networks
Channel factories. Conrad Burchert, Christian Decker and Roger Wattenhofer.
A factory is a shared on-chain output that several parties can use to allocate many channels off-chain, so the chain sees the factory and not every channel.
A reading of the public document. Not a copy of it, and not a claim about a later network that reused the name.
A consumer wallet that opens one on-chain channel per user has not used this. Ask what the chain actually has to see.
The five-minute read
The defect
Opening a Lightning channel is an on-chain transaction. A million users opening channels is a million transactions.
The rule
A factory is a shared on-chain output that several parties can use to allocate many channels off-chain, so the chain sees the factory and not every channel.
How it is put together
One on-chain output funds many pairwise channels. Rebalancing inside the factory does not touch the chain. The factory has its own dispute path.
Where the claim stops
The paper is a construction, not the Lightning specification.
One action, walked through
- Parties lock funds in the factory.
- They assign slices to channels by off-chain updates.
- A dispute or a close publishes only what is needed to recover a slice.
- How many channels does one on-chain output fund?
The argument, unpacked
Why it is still on the desk
A consumer wallet that opens one on-chain channel per user has not used this. Ask what the chain actually has to see.
After the text
Later factory and timeout-tree designs return to the same ratio: on-chain bytes per user. The 2018 paper is the first clear statement.
What has to be true
- The paper is a construction, not the Lightning specification.
- A factory concentrates dispute risk in one output.
- It does not create inbound liquidity by magic.
What happened after the paper
Later factory and timeout-tree designs return to the same ratio: on-chain bytes per user. The 2018 paper is the first clear statement.
What to check before you use the idea
- How many channels does one on-chain output fund?
- What is published in a dispute?
- Who must be online to reassign a slice?
Terms
- Factory
- One shared output that allocates many channels.
- Slice
- The portion of the factory assigned to one channel.
The problem the paper names
Opening a Lightning channel is an on-chain transaction. A million users opening channels is a million transactions.
What the design proposes
- One on-chain output funds many pairwise channels.
- Rebalancing inside the factory does not touch the chain.
- The factory has its own dispute path.
How the mechanism is specified
- Parties lock funds in the factory.
- They assign slices to channels by off-chain updates.
- A dispute or a close publishes only what is needed to recover a slice.
What this page does not treat as proven
- The paper is a construction, not the Lightning specification.
- A factory concentrates dispute risk in one output.
- It does not create inbound liquidity by magic.
Why a venture studio still reads it
A consumer wallet that opens one on-chain channel per user has not used this. Ask what the chain actually has to see.
This is Blockchain Lab's reading of a public design paper. It is not the paper, not a copy of it, and not an offer of tokens, equity, custody or a partnership. Later network behaviour can diverge from the text. Nothing here is investment, legal or technical advice.
Research status: Design paper. Last reviewed: 1 October 2026. This is a reading of a public paper, not investment, legal or security advice.