Bitcoin Lightning Network

tl;dr Bitcoin pretending to be Ripple for a while.

• Payment Channels: when parties put funds in an escrow and agree to keep the books themselves rather than on the public ledger.
• Payment Channel Networks: when people are trading money that only exists inside of the payment channels and don't actually exist on the public ledger.

At some point the internal ledger of a payment channel has to be reckoned. This moves the money in appropriate amounts to the parties that are supposed to have it while sparing the blockchain all of the intermediary exchanges that happened.

So a player can stake 100$ with Valve (hypothetically) and when they buy Steam games there is no actual transaction but just an agreement that when the transaction is resolved Valve will keep whatever amount the player has given in exchange for game subscriptions. At the end of a month the amounts are doled out to each party and as far as Bitcoin is concerned only a single transaction has occurred. Meaning those individual transactions have *zero transaction fees* and no validation overhead.

Entire networks of these arrangements can be made which basically means subsets of the network are working as Ripple does with some form of mutual trust network in place. The mutual trust networks *at some point* are reckoned with the blockchain to *actually* move the wealth.