Lightning Network: Channel Factories

Over the past week or so I've been getting acquainted with the details concerning the implementation of the Lightning Network, which is a secure trustless off-chain scaling solution for Bitcoin (also Litecoin as of May I believe). It's a really fascinating concept to wrap one's head around and I still need to pin down a few technical details to fully understand it, but the overall concept makes a lot of sense.

Today I stumbled upon this paper [1] which deals with increasing the scalability provided by the Lightning Network using a 3rd layer (maybe more?) to reduce the on-chain footprint of opening and closing channels required by the Lightning Network due to the need to replenish channels.

It's only 18 pages, compared to the 59 pages of the Lightning Network Paper, but does require an understanding of the Lightning Network protocol to realize how any of this is secure if it's not on the blockchain (Spoiler: Time Locked transaction outputs and Segwit).

[1] Scalable Funding of Bitcoin Micropayment Channel Networks