What are the main differences between on-chain and off-chain transactions in the world of digital currencies?

1 answers

• Riyaz MohammedFeb 06, 2021 · 5 years ago
  On-chain transactions are the transactions that take place directly on the blockchain. They are recorded on the public ledger and require network consensus for validation. This ensures a high level of security and decentralization. However, on-chain transactions can be slower and more expensive due to the need for network verification and the limited capacity of the blockchain. On the other hand, off-chain transactions occur outside of the blockchain. They are facilitated by layer-two solutions or payment channels, which enable faster and cheaper transactions. While off-chain transactions may sacrifice some decentralization and security, they offer greater scalability and cost-effectiveness. In summary, the main differences between on-chain and off-chain transactions are their speed, scalability, security, and cost.
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