In the context of blockchain and cryptocurrencies, “on-chain” refers to all transactions and actions that occur directly on the blockchain itself.
A blockchain is a decentralized, distributed ledger that records all transactions of a particular cryptocurrency. Each “block” contains a list of transactions, and when these transactions are completed, they are said to have occurred “on-chain” because they are permanently recorded on the blockchain.
For instance, if you were to send some Bitcoin to another person, that transaction would be processed by the network, verified, and then added to the Bitcoin blockchain. This is an on-chain transaction.
On-chain transactions have a few key characteristics:
- Immutability: Once a transaction has been added to the blockchain, it cannot be altered or deleted.
- Transparency: All on-chain transactions are visible to all participants in the network, providing a high level of transparency.
- Security: Transactions are secured through cryptographic techniques. They are verified by network participants (like miners in a proof-of-work system or validators in a proof-of-stake system) before they are added to the blockchain.
- Finality: Once confirmed, an on-chain transaction is considered final.
On-chain is often contrasted with “off-chain” transactions, which occur outside the blockchain network and are not subject to the same level of transparency, security, and immutability. Off-chain transactions can be faster and less expensive, but they don’t provide the same level of security and trust as on-chain transactions.