What is Off-chain

Off-chain cryptocurrency transactions occur externally and are not recorded on the main public chain of the blockchain. Such transactions can occur in various ways. Interchanging private keys could be an example of an off-chain transaction. In this case, the digital assets remain in the same place, but their ownership is transferred to the new holder of the private key.

Off-chain transactions usually involve no transactions fees or at least much lower transaction fees compared to on-chain transactions and are faster to execute. This is because the transactions, being off the blockchain, are not verified by miners. In other words, the involved parties do not have to wait for the authentication of the transaction and do not have to reward the miners. Since the transactions are not recorded on the public ledger, off-chain transactions are also more discrete. However, some types of off-chain transactions could exclude the benefits of the blockchain, mainly visibility, transparency, immutability, and decentralization.

Off-chain transactions do not necessarily signify that the transaction occurred completely independently from the blockchain. It simply refers to the transactions that do not occur on the public blockchain.

Off-chain and on-chain each have their own advantages of disadvantages.

Off-chain

Off-chain cryptocurrency transactions occur externally and are not recorded on the main public chain of the blockchain.

Related terms

Offshore account Order book Oracle Orphan block Open-source

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