Replying to Avatar fiatbad

"They will pay the onchain fees ONLY when the channel is closed"

So, the way this works is that the channel opening is not broadcast to on-chain nodes whatsoever, and the first time L1 even knows about the channel is at the time of closing? Is this correct? I'm just trying to get a better understanding of the technical aspect of 0-conf.
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ZEUS 1y ago

Technically you don’t even have to close it formally onchain, if you trust your counterparty as you can settle up out of band.

This works great if you are setting channels up between your own nodes.

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fiatbad 1y ago

Well that just blows my mind.

Normally, when a channel is closed, it's settled as two on-chain utxos, one for each side of the channel, into their respective wallet.

Now, you're telling me we never have to settle on-chain? Without new utxos, how is it settled at all? What does it mean to settle up "out of band"?