On-Chain vs. Off-Chain:
Key Differences Explained
On-Chain:
- Transactions are recorded directly on the blockchain.
- They are transparent, immutable, and require network consensus (miners or validators) to confirm.
- Advantages: High security, trustless, and decentralized.
- Disadvantages: Slower and more expensive due to network congestion and fees.
Off-Chain:
- Transactions occur outside the blockchain and are later settled on-chain, or not recorded at all.
- They rely on third parties or private agreements.
- Advantages: Faster, cheaper, and scalable.
- Disadvantages: Less secure and can be more centralized.