The words of Crypto by the Bitsapiens team.

Game Channels

To understand the role of game channels, one needs to realize the working principle of blockchain games. In general, blockchain games are available via fully decentralized and trustless environments. While it removes any centralized authority and ensures provably fair play, blockchain games do encounter the usual “technical difficulties.”
For instance, as more players join a game, storing all of the files and data on the underlying blockchain network will eventually result in scalability challenges. Additionally, when it comes to multiplayer gaming or other PvP (player vs player) matches, it is pertinent that each player gets to make their moves quickly. However, most blockchain games don’t offer this functionality, as they need to create a transaction between each move, which takes time depending on the network congestion.

Game channels solve this problem while offering more features for blockchain games. By design, applications using game channels are protocols that facilitate secure off-chain transactions between players. Accordingly, game channels can be used to build private channels that will run parallel to the main chain but in their own space (off-chain) and near-real-time. With game channels, any blockchain network can increase its scalability to support numerous games and dApps without compromising transaction speeds.
In addition, game channels provide purely decentralized and trustless dispute resolution without requiring a third-party or central authority. In a way, game channels can be considered individual payment channels for specific games.

How Do Game Channels Work?
The main objective of game channels is to facilitate real-time gameplay between players. Since most blockchain games add transactions for every move and those transactions need to get mined into blocks before they become “active”, there is a noticeable delay that players have to adjust to before they can make another move.

Game channels enable players to take their gameplay on a secure off-chain network. As such, the time between moves is cut down by a considerable amount, granting players the opportunity to enjoy the game in near-real-time.

Let’s consider an example to understand how game channels work. For instance, two players set up a game channel to compete in a turn-based card game for prize money (tokens). Both players settle on the rules and guidelines for the game, co-fund the prize money, and open the game channel. They start playing via the game channel, and once the predefined win/loss criteria are met, the smart contract releases the funds to the winner’s account, all records are entered into the ledger (on the main chain), and the game channel closes.

Amidst this, both players are still connected to the public blockchain network on which the card game is originally supported. If one of the players tries to cheat and enters an invalid outcome on the public ledger, the other player is able to trustlessly prove this and enforce the game rules correctly.