Off-Chain
Transactions processed outside the main blockchain, settled periodically on-chain for efficiency.
What is Off-Chain?
Off-chain transactions occur via secondary protocols, reducing L1 load—e.g., Lightning Network channels handle 5,000 TPS at 1 sat/vB, settling nets on Bitcoin every 1,000 txns. CEXs like Binance record internal trades off-chain, netting 99% of $2 trillion daily volume before on-chain withdrawals.
Benefits include speed (sub-second vs. 10-min blocks) and low fees (<$0.01 vs. $5), with privacy via batched data—e.g., Plasma sidechains aggregate 1,000 txns into Merkle proofs. Liquid Network processes 1-minute blocks for $500 million assets.
Drawbacks: reduced transparency and trust reliance (e.g., FTX 2022 collapse), yet off-chain scales to 1 million TPS, comprising 95% of crypto activity in 2025.
Related Terms
Cryptorails
A term referring to blockchain infrastructure enabling stablecoin transactions and financial applications.
Limit Orders
Orders to buy or sell a digital asset at a specified price or better, only executing if the market reaches that price.
ETF
Exchange-Traded Funds that hold baskets of assets and trade on stock exchanges, providing regulated exposure to digital assets.
Convertible Preferred Stock
Preferred stock convertible into common shares, blending dividend income with equity conversion potential.
Concentrated Liquidity (Uniswap)
Uniswap concentrated liquidity is a feature of Uniswap V3 that allows liquidity providers to allocate capital within specific price ranges of a token pair, increasing capital efficiency and potential returns compared to traditional AMM models.
Circle
The company behind USDC, focused on building transparent and compliant digital asset solutions.