Statechains

Statechains is a protocol facilitating the transfer of Bitcoin ownership without requiring on-chain transactions for every transfer. Instead of sending coins from address to address, statechain users transfer the private key that can be used to spend the coins. It uses a multi-signature wallet, which requires two keys to operate. One key will be held by the third party and one by the bitcoin owner to ensure security and prevent unauthorized access. The entity oversees the secure transfer of ownership keys between parties, ensuring each transaction is valid and authorized.

Statechains operate under strict security measures and must comply with financial regulations to maintain their integrity and legality. Overall, the statechain entity provides a scalable and efficient way to manage Bitcoin transactions without burdening the main blockchain network.

Statechains are not widely used yet because it is a new and complex technology that is still in development. Statechains also face competition from more established layer-2 solutions like the Lightning Network. Additionally, the infrastructure and ecosystem support for statechains is still developing, which hinders their broader adoption.

➤ Learn more about how the Lightning Network works