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Agree, in which case the channel is closed and 

the changes are committed immediately;

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Dispute the final state by submitting a state signed 

by all parties with a higher sequence number; or

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Do nothing, which will constitute agreement 

once the challenge period expires.

Imagine the scenario in which Bob wished 

to “cheat” by broadcasting the earlier state 

which assigned him 150 tokens instead of 125 

tokens. That state was also signed by both 

Bob and Alice, so it is in some sense valid. 

In this example, if Alice disagrees with the final state 

that Bob submits, then she would have a chance 

to submit the later state (sequence 2), which was 

also signed by both parties; in this example, that 

would supersede Bob’s final state. Bob could then 

either agree or do nothing. He would be unable to 

dispute since he does not have a later state signed 

by both parties. This means that no participant 

can prevent another participant from closing the 

channel, and no one should be able to close the 

channel except with the legitimate final state. 

Further, the reputational impact of any party 

attempting to cheat the network is recorded and 

subsequently visible to other participants.