A channel in Lightning is just an on-chain UTXO owned by two entities who have to agree how the UTXO will be spent. Lightning transactions using the channel are just updates to the agreement between those two owners about who will get funds from the UTXO when the channel is closed.
Discussion
Cool 👌. Thanks
I suppose lightning transactions initiate smart contracts
Yes. Lightning channels are smart contracts on Bitcoin in a 2:2 multisig.
Multisig means both parties must sign the transaction before the UTXO is spent?