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What Yellow Solves

In this guide, you will learn why Yellow Network exists, what problems it addresses, and how it provides a faster, cheaper way to build Web3 applications.

The Blockchain Scalability Problem​

Every blockchain transaction requires global consensus. While this guarantees security and decentralization, it creates three fundamental limitations:

ChallengeImpact on Users
High LatencyTransactions take 15 seconds to several minutes for confirmation
High CostsGas fees spike during network congestion, making microtransactions impractical
Limited ThroughputNetworks like Ethereum process ~15-30 transactions per second

For applications requiring real-time interactions—gaming, trading, micropayments—these constraints make traditional blockchain unusable as a backend.

How Yellow Network Solves This​

Yellow Network uses state channels to move high-frequency operations off-chain while preserving blockchain-level security guarantees.

The Core Insight​

Most interactions between parties don't need immediate on-chain settlement. Consider a chess game with a 10 USDC wager:

  • On-chain approach: Every move requires a transaction → 40+ transactions → $100s in fees
  • State channel approach: Lock funds once, play off-chain, settle once → 2 transactions → minimal fees

State channels let you execute unlimited off-chain operations between on-chain checkpoints.

What You Get​

FeatureBenefit
Instant TransactionsSub-second finality (< 1 second typical)
Zero Gas CostsOff-chain operations incur no blockchain fees
Unlimited Throughput*No consensus bottleneck limiting operations
Blockchain SecurityFunds are always recoverable via on-chain contracts

*Theoretically unlimited—state channels have no blockchain consensus overhead. Real-world performance depends on signature generation speed, network latency between participants, and application complexity. We'll be publishing detailed benchmarks soon.

The Nitrolite Protocol​

Yellow Network is built on Nitrolite, a state channel protocol designed for EVM-compatible chains. Nitrolite provides:

  • Fund Custody: Smart contracts that securely lock and release assets
  • Dispute Resolution: Challenge-response mechanism ensuring fair outcomes
  • Final Settlement: Cryptographic guarantees that final allocations are honored
When to Use Yellow Network

Choose Yellow Network when your application needs:

  • Real-time interactions between users
  • Microtransactions or streaming payments
  • High transaction volumes without gas costs
  • Multi-party coordination with instant settlement

Chain Abstraction with Clearnode​

A Clearnode serves as your entry point to Yellow Network. When you connect to a Clearnode:

  1. Deposit tokens into the Custody Contract on any supported chain
  2. Resize your channel to move funds to your unified balance
  3. Transact instantly with any other user on the network
  4. Withdraw back through the Custody Contract to any supported chain
Fund Flow

Funds flow through the Custody Contract (on-chain) before reaching your unified balance (off-chain). The resize operation moves funds between your on-chain available balance and your off-chain unified balance. See Architecture for the complete flow.

For example, deposit 50 USDC on Polygon and 50 USDC on Base—after resizing, your unified balance shows 100 USDC. You can then withdraw all 100 USDC to Arbitrum if you choose.

Real-World Applications​

Payment Applications​

  • Micropayments: Pay-per-article, API usage billing, content monetization
  • Streaming payments: Subscription services, hourly billing, real-time payroll
  • P2P transfers: Instant remittances without intermediaries

Gaming Applications​

  • Turn-based games: Chess, poker, strategy games with wagers
  • Real-time multiplayer: In-game economies with instant transactions
  • Tournaments: Prize pools and automated payouts

DeFi Applications​

  • High-frequency trading: Execute trades without MEV concerns
  • Prediction markets: Real-time betting with instant settlement
  • Escrow services: Multi-party coordination with dispute resolution

Security Model​

Yellow Network maintains blockchain-level security despite operating off-chain:

GuaranteeHow It's Achieved
Fund SafetyAll funds locked in audited smart contracts
Dispute ResolutionChallenge period allows contesting incorrect states
Cryptographic ProofEvery state transition is signed by participants
Recovery GuaranteeUsers can always recover funds via on-chain contracts

If a Clearnode becomes unresponsive or malicious, you can submit your latest signed state to the blockchain and recover your funds after a challenge period.

Next Steps​

Now that you understand what Yellow solves, continue to: