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A channel factory is a proposed new layer between between the blockchain and payment channels that solves the scalability problem of having too many on-chain transactions for micropayments in the October 2017 paper "Scalable Funding of Bitcoin Micropayment Channel Networks" by Burchert, Decker & Wattenhofer.

A channel factory is a proposed new layer between between the blockchain and payment channels that solves the scalability problem of having too many on-chain transactions for micropayments in the October 2017 paper "Scalable Funding of Bitcoin Micropayment Channel Networks" by Burchert, Decker & Wattenhofer.