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Eltoo is a protocol first proposed in an April 2018 paper from Blockstream’s c-lightning team that modifies the Lightning protocol in a number of ways, for example, to make the punishment of broadcasting an out-of-date commitments less severe.

In the current implementation of the Lightning Network, older off-chain balances are unsafe. Broadcasting these older balances constitutes “cheating” and the "cheater" is penalized via the counter-party taking the cheater's funds (in addition to their own). 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 counter-party 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/

See Also