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eltoo is a protocol first proposed in an April 2018 paper from Blockstream’s c-lightning team. In the current implementation of the Lightning Network, older off-chain balances are unsafe. Broadcasting these older balances constitutes “cheating” and funds are slashed (with users being penalized). This is not ideal. There are lots of reasons why users may broadcast an old state however, including bugs and latency issues from backups.

In Eltoo, if a user broadcasts an old state, their counterparty has a window to broadcast the latest transaction to correct the final balance. This arbitration system “makes it much easier and computationally efficient for payment channels to be opened between many users in a single onchain transaction” per Bitcoin’s Op-Tech update.

From https://www.theblockcrypto.com/2019/01/18/from-reckless-to-wumbology-lightning-networks-infrastructural-build-out/