diff --git a/cmd/kvcli/main.go b/cmd/kvcli/main.go
index 48c0876b..90aa90e8 100644
--- a/cmd/kvcli/main.go
+++ b/cmd/kvcli/main.go
@@ -55,8 +55,9 @@ func main() {
 		)...)
 
 	rootCmd.AddCommand(
-		client.PostCommands(
+		client.PostCommands( // this just wraps the input cmds with common flags
 			bankcmd.SendTxCmd(cdc),
+			// paychan commands...
 			//ibccmd.IBCTransferCmd(cdc),
 			//ibccmd.IBCRelayCmd(cdc),
 			//stakecmd.GetCmdCreateValidator(cdc),
diff --git a/internal/x/paychan/README.md b/internal/x/paychan/README.md
new file mode 100644
index 00000000..cad4cfea
--- /dev/null
+++ b/internal/x/paychan/README.md
@@ -0,0 +1,15 @@
+Paychan Sketch
+
+Simplifications:
+
+ - unidirectional paychans
+ - no top ups or partial withdrawals (only opening and closing)
+ - no protection against fund lock up from dissapearing receiver
+
+
+ TODO
+  - fill in details
+  - add tests
+  - is errors.go needed?
+  - is wire.go needed?
+  - remove simplifications
\ No newline at end of file
diff --git a/internal/x/paychan/client/cmd/cmd.go b/internal/x/paychan/client/cmd/cmd.go
new file mode 100644
index 00000000..168be42d
--- /dev/null
+++ b/internal/x/paychan/client/cmd/cmd.go
@@ -0,0 +1,68 @@
+package cli
+
+import (
+	"fmt"
+
+	"github.com/spf13/cobra"
+	//"github.com/cosmos/cosmos-sdk/client/context"
+	//sdk "github.com/cosmos/cosmos-sdk/types"
+	//"github.com/cosmos/cosmos-sdk/wire"
+	//"github.com/cosmos/cosmos-sdk/x/auth"
+)
+
+// list of functions that return pointers to cobra commands
+// No local storage needed for cli acting as a sender
+
+// create paychan
+// close paychan
+// get paychan(s)
+// send paychan payment
+// get balance from receiver
+
+// example from x/auth
+/*
+func GetAccountCmd(storeName string, cdc *wire.Codec, decoder auth.AccountDecoder) *cobra.Command {
+	return &cobra.Command{
+		Use:   "account [address]",
+		Short: "Query account balance",
+		Args:  cobra.ExactArgs(1),
+		RunE: func(cmd *cobra.Command, args []string) error {
+
+			// find the key to look up the account
+			addr := args[0]
+
+			key, err := sdk.GetAccAddressBech32(addr)
+			if err != nil {
+				return err
+			}
+
+			// perform query
+			ctx := context.NewCoreContextFromViper()
+			res, err := ctx.Query(auth.AddressStoreKey(key), storeName)
+			if err != nil {
+				return err
+			}
+
+			// Check if account was found
+			if res == nil {
+				return sdk.ErrUnknownAddress("No account with address " + addr +
+					" was found in the state.\nAre you sure there has been a transaction involving it?")
+			}
+
+			// decode the value
+			account, err := decoder(res)
+			if err != nil {
+				return err
+			}
+
+			// print out whole account
+			output, err := wire.MarshalJSONIndent(cdc, account)
+			if err != nil {
+				return err
+			}
+			fmt.Println(string(output))
+			return nil
+		},
+	}
+}
+*/
diff --git a/internal/x/paychan/client/rest/channel-watcher.go b/internal/x/paychan/client/rest/channel-watcher.go
new file mode 100644
index 00000000..d00c7f51
--- /dev/null
+++ b/internal/x/paychan/client/rest/channel-watcher.go
@@ -0,0 +1,7 @@
+package lcd
+
+import ()
+
+// implement thing that polls blockchain and handles paychan disputes
+// needs plugged into LCD - add a "background processes" slot in the LCD run function?
+// eventually LCD evolves into paychan (network) daemon
diff --git a/internal/x/paychan/client/rest/rest.go b/internal/x/paychan/client/rest/rest.go
new file mode 100644
index 00000000..3565d70a
--- /dev/null
+++ b/internal/x/paychan/client/rest/rest.go
@@ -0,0 +1,22 @@
+package rest
+
+import (
+	"github.com/gorilla/mux"
+	//"github.com/tendermint/go-crypto/keys"
+	//"github.com/cosmos/cosmos-sdk/client/context"
+	//"github.com/cosmos/cosmos-sdk/wire"
+)
+
+// RegisterRoutes registers paychan-related REST handlers to a router
+func RegisterRoutes(ctx context.CoreContext, r *mux.Router, cdc *wire.Codec, kb keys.Keybase) {
+	//r.HandleFunc("/accounts/{address}/send", SendRequestHandlerFn(cdc, kb, ctx)).Methods("POST")
+}
+
+// handler functions ...
+// create paychan
+// close paychan
+// get paychan(s)
+// send paychan payment
+// get balance from receiver
+// get balance from local storage
+// handle incoming payment
diff --git a/internal/x/paychan/handler.go b/internal/x/paychan/handler.go
new file mode 100644
index 00000000..e25c68f9
--- /dev/null
+++ b/internal/x/paychan/handler.go
@@ -0,0 +1,33 @@
+package paychan
+
+import (
+	sdk "github.com/cosmos/cosmos-sdk/types"
+	"reflect"
+)
+
+// NewHandler returns a handler for "paychan" type messages.
+func NewHandler(k Keeper) sdk.Handler {
+	return func(ctx sdk.Context, msg sdk.Msg) sdk.Result {
+		switch msg := msg.(type) {
+		case MsgSend:
+			return handleMsgSend(ctx, k, msg)
+		case MsgIssue:
+			return handleMsgIssue(ctx, k, msg)
+		default:
+			errMsg := "Unrecognized paychan Msg type: " + reflect.TypeOf(msg).Name()
+			return sdk.ErrUnknownRequest(errMsg).Result()
+		}
+	}
+}
+
+// Handle CreateMsg.
+func handleMsgCreate(ctx sdk.Context, k Keeper, msg MsgSend) sdk.Result {
+	// k.CreatePaychan(args...)
+	// handle erros
+}
+
+// Handle CloseMsg.
+func handleMsgClose(ctx sdk.Context, k Keeper, msg MsgIssue) sdk.Result {
+	// k.ClosePaychan(args...)
+	// handle errors
+}
diff --git a/internal/x/paychan/keeper.go b/internal/x/paychan/keeper.go
new file mode 100644
index 00000000..058ec628
--- /dev/null
+++ b/internal/x/paychan/keeper.go
@@ -0,0 +1,62 @@
+package paychan
+
+// keeper of the paychan store
+type Keeper struct {
+	storeKey   sdk.StoreKey
+	cdc        *wire.Codec // needed?
+	coinKeeper bank.Keeper
+
+	// codespace
+	codespace sdk.CodespaceType // ??
+}
+
+func NewKeeper(cdc *wire.Codec, key sdk.StoreKey, ck bank.Keeper, codespace sdk.CodespaceType) Keeper {
+	keeper := Keeper{
+		storeKey:   key,
+		cdc:        cdc,
+		coinKeeper: ck,
+		codespace:  codespace,
+	}
+	return keeper
+}
+
+// bunch of business logic ...
+
+func (keeper Keeper) GetPaychan(paychanID) Paychan {
+	// load from DB
+	// unmarshall
+	// return
+}
+
+func (keeper Keeper) setPaychan(pych Paychan) sdk.Error {
+	// marshal
+	// write to db
+}
+
+func (keeer Keeper) CreatePaychan(receiver sdkAddress, amt sdk.Coins) (Paychan, sdk.Error) {
+	// subtract coins from sender
+	// create new Paychan struct (create ID)
+	// save to db
+
+	// validation:
+	// sender has enough coins
+	// receiver address exists?
+	// paychan doesn't exist already
+}
+
+func (keeper Keeper) ClosePaychan() sdk.Error {
+	// add coins to sender
+	// add coins to receiver
+	// delete paychan from db
+
+	// validation:
+	// paychan exists
+	// output coins are less than paychan balance
+	// sender and receiver addresses exist?
+}
+
+func paychanKey(Paychan) {
+	// concat sender and receiver and integer ID
+}
+
+// maybe getAllPaychans(sender sdk.address) []Paychan
diff --git a/internal/x/paychan/keeper_test.go b/internal/x/paychan/keeper_test.go
new file mode 100644
index 00000000..344c3148
--- /dev/null
+++ b/internal/x/paychan/keeper_test.go
@@ -0,0 +1,93 @@
+package paychan
+
+import (
+	"testing"
+
+	"github.com/stretchr/testify/assert"
+)
+
+// example from x/bank
+func TestKeeper(t *testing.T) {
+	// ms, authKey := setupMultiStore()
+
+	// cdc := wire.NewCodec()
+	// auth.RegisterBaseAccount(cdc)
+
+	// ctx := sdk.NewContext(ms, abci.Header{}, false, nil, log.NewNopLogger())
+	// accountMapper := auth.NewAccountMapper(cdc, authKey, &auth.BaseAccount{})
+	// coinKeeper := NewKeeper(accountMapper)
+
+	// addr := sdk.Address([]byte("addr1"))
+	// addr2 := sdk.Address([]byte("addr2"))
+	// addr3 := sdk.Address([]byte("addr3"))
+	// acc := accountMapper.NewAccountWithAddress(ctx, addr)
+
+	// // Test GetCoins/SetCoins
+	// accountMapper.SetAccount(ctx, acc)
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{}))
+
+	// coinKeeper.SetCoins(ctx, addr, sdk.Coins{{"foocoin", 10}})
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"foocoin", 10}}))
+
+	// // Test HasCoins
+	// assert.True(t, coinKeeper.HasCoins(ctx, addr, sdk.Coins{{"foocoin", 10}}))
+	// assert.True(t, coinKeeper.HasCoins(ctx, addr, sdk.Coins{{"foocoin", 5}}))
+	// assert.False(t, coinKeeper.HasCoins(ctx, addr, sdk.Coins{{"foocoin", 15}}))
+	// assert.False(t, coinKeeper.HasCoins(ctx, addr, sdk.Coins{{"barcoin", 5}}))
+
+	// // Test AddCoins
+	// coinKeeper.AddCoins(ctx, addr, sdk.Coins{{"foocoin", 15}})
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"foocoin", 25}}))
+
+	// coinKeeper.AddCoins(ctx, addr, sdk.Coins{{"barcoin", 15}})
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"barcoin", 15}, {"foocoin", 25}}))
+
+	// // Test SubtractCoins
+	// coinKeeper.SubtractCoins(ctx, addr, sdk.Coins{{"foocoin", 10}})
+	// coinKeeper.SubtractCoins(ctx, addr, sdk.Coins{{"barcoin", 5}})
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"barcoin", 10}, {"foocoin", 15}}))
+
+	// coinKeeper.SubtractCoins(ctx, addr, sdk.Coins{{"barcoin", 11}})
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"barcoin", 10}, {"foocoin", 15}}))
+
+	// coinKeeper.SubtractCoins(ctx, addr, sdk.Coins{{"barcoin", 10}})
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"foocoin", 15}}))
+	// assert.False(t, coinKeeper.HasCoins(ctx, addr, sdk.Coins{{"barcoin", 1}}))
+
+	// // Test SendCoins
+	// coinKeeper.SendCoins(ctx, addr, addr2, sdk.Coins{{"foocoin", 5}})
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"foocoin", 10}}))
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr2).IsEqual(sdk.Coins{{"foocoin", 5}}))
+
+	// _, err2 := coinKeeper.SendCoins(ctx, addr, addr2, sdk.Coins{{"foocoin", 50}})
+	// assert.Implements(t, (*sdk.Error)(nil), err2)
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"foocoin", 10}}))
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr2).IsEqual(sdk.Coins{{"foocoin", 5}}))
+
+	// coinKeeper.AddCoins(ctx, addr, sdk.Coins{{"barcoin", 30}})
+	// coinKeeper.SendCoins(ctx, addr, addr2, sdk.Coins{{"barcoin", 10}, {"foocoin", 5}})
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"barcoin", 20}, {"foocoin", 5}}))
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr2).IsEqual(sdk.Coins{{"barcoin", 10}, {"foocoin", 10}}))
+
+	// // Test InputOutputCoins
+	// input1 := NewInput(addr2, sdk.Coins{{"foocoin", 2}})
+	// output1 := NewOutput(addr, sdk.Coins{{"foocoin", 2}})
+	// coinKeeper.InputOutputCoins(ctx, []Input{input1}, []Output{output1})
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"barcoin", 20}, {"foocoin", 7}}))
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr2).IsEqual(sdk.Coins{{"barcoin", 10}, {"foocoin", 8}}))
+
+	// inputs := []Input{
+	// 	NewInput(addr, sdk.Coins{{"foocoin", 3}}),
+	// 	NewInput(addr2, sdk.Coins{{"barcoin", 3}, {"foocoin", 2}}),
+	// }
+
+	// outputs := []Output{
+	// 	NewOutput(addr, sdk.Coins{{"barcoin", 1}}),
+	// 	NewOutput(addr3, sdk.Coins{{"barcoin", 2}, {"foocoin", 5}}),
+	// }
+	// coinKeeper.InputOutputCoins(ctx, inputs, outputs)
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr).IsEqual(sdk.Coins{{"barcoin", 21}, {"foocoin", 4}}))
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr2).IsEqual(sdk.Coins{{"barcoin", 7}, {"foocoin", 6}}))
+	// assert.True(t, coinKeeper.GetCoins(ctx, addr3).IsEqual(sdk.Coins{{"barcoin", 2}, {"foocoin", 5}}))
+
+}
diff --git a/internal/x/paychan/types.go b/internal/x/paychan/types.go
new file mode 100644
index 00000000..aec54ebc
--- /dev/null
+++ b/internal/x/paychan/types.go
@@ -0,0 +1,98 @@
+package paychan
+
+import (
+	sdk "github.com/cosmos/cosmos-sdk/types"          
+)
+
+////////
+
+// probably want to convert this to a general purpose "state"
+struct Paychan {
+	balance sdk.Coins
+	sender sdk.Address
+	receiver sdk.Address
+}
+
+
+/////////////
+
+// Message implement the sdk.Msg interface:
+
+// type Msg interface {
+
+// 	// Return the message type.
+// 	// Must be alphanumeric or empty.
+// 	Type() string
+
+// 	// Get the canonical byte representation of the Msg.
+// 	GetSignBytes() []byte
+
+// 	// ValidateBasic does a simple validation check that
+// 	// doesn't require access to any other information.
+// 	ValidateBasic() Error
+
+// 	// Signers returns the addrs of signers that must sign.
+// 	// CONTRACT: All signatures must be present to be valid.
+// 	// CONTRACT: Returns addrs in some deterministic order.
+// 	GetSigners() []Address
+// }
+
+/////////////// CreatePayChan
+// find a less confusing name
+type CreateMsg struct {
+	// maybe just wrap a paychan struct
+	sender sdk.Address
+	receiver sdk.Address
+	amount sdk.Balance
+}
+
+func (msg CreatMsg) NewCreateMsg() CreateMsg {
+	return CreateMsg{ }
+}
+
+func (msg CreateMsg) Type() string { return "paychan" }
+
+func (msg CreateMsg) GetSigners() []sdk.Address {
+	// sender
+	//return []sdk.Address{msg.sender}
+}
+
+func (msg CreateMsg) GetSignBytes() []byte {
+	
+}
+
+func (msg CreateMsg) ValidateBasic() sdk.Error {
+	// verify msg as much as possible without using external information (such as account balance)
+	// are all fields present
+	// are all fields valid
+	// maybe check if sender and receiver is different
+}
+
+/////////////////
+type CloseMsg struct {
+	// have to include sender and receiver in msg explicitly (rather than just universal paychanID)
+	//  this gives ability to verify signatures with no external information
+	sender sdk.Address
+	receiver sdk.Address
+	id integer
+	receiverAmount sdk.Coins // amount the receiver should get - sender amount implicit with paychan balance
+}
+
+func (msg CloseMsg) NewCloseMsg( args... ) CloseMsg {
+	return CloseMsg{ args... }
+}
+
+func (msg CloseMsg) Type() string { return "paychan" }
+
+func (msg CloseMsg) GetSigners() []sdk.Address {
+	// sender and receiver
+}
+
+func (msg CloseMsg) GetSignBytes() []byte {
+	
+}
+
+func (msg CloseMsg) ValidateBasic() sdk.Error {
+	return msg.IBCPacket.ValidateBasic()
+}
+