Statechains are a proposed offchain system for allowing a user (such as Alice) to delegate the ability to spend a UTXO to another user (Bob), who can then further delegate the spending authority to a third user (Carol), etc.

The offchain delegation operations are all performed using signature adaptors and the cooperation of a trusted third party who uses the eltoo mechanism and their knowledge of every previous delegation operation to ensure each new delegation uses a state number higher than any previously used state number. These incrementing state numbers ensure an onchain spend by the most recent delegate (Carol) can take precedence over spends by previous delegates (Alice and Bob), assuming the trusted third party hasn’t colluded with a previous delegate to cheat.

Beyond colluding with a delegated signer (such as previous delegates Alice or Bob), there is no way for the trusted third party to steal funds. A delegated signer can always spend the UTXO onchain without needing permission from the trusted third party, arguably making statechains less trusted than federated sidechains.

Although initially described for use with schnorr-based signature adaptors, there has been work to adapt the protocol to ECDSA-based multisignatures and to use decrementing locktime similar to that proposed for duplex micropayment channels rather than eltoo. This would make statechains usable on Bitcoin without depending on any proposed consensus changes.

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