In relation to this question:
Alice & Bob where they transfer 1 BTC each other.
Both Alice & Bob transfer 1 BTC into a shared multisig address.
A ‘balance sheet’ is created where 1 BTC is paid by Alice -> Bob and 1 BTC is paid by Bob -> Alice.
In the above transaction, Alice signs the transaction and gives to Bob and vice-versa.
Either Alice or Bob can sign their counterparts payout transaction and broadcast it to the blockchain.
Alice will update the ‘Balance sheet’ as 0.5 BTC to Alice and 1.5 to Bob and send the payout transaction to Bob to sign.
To ensure neither Alice or Bob revert to the old transaction, each will create an ‘anti-cheat’ transaction.
If Alice and Bob wants to close the channel, they can consensually close the channel and broadcast the transaction to the blockchain.
Where is this balance sheet persisted? What happens if BOTH Alice AND Bob lose this information?