On ledger paychan requires explicit interaction with the ledger and involves escrowing funds with a mechanism to send information that allows the destination to unlock some of those funds. Off ledger paychan is a communication standard for agreeing on changes to a two-party accounting relationship that the sender promises to (but is not cryptographically bound to) settle later. Importantly, no interaction with the ledger is required, since settlement is explicitly separated. ... The on-chain paychan is just used as the settlement layer. Once some amount of money has been "transferred" over off-chain paychan, the sender then makes a transfer over on-chain paychan.