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Onchain Economics
Infrastructure

Off-Chain

Transactions or computations that occur outside the main blockchain, often for speed or cost efficiency.

In-Depth Explanation

Off-chain activity doesn't require consensus from the entire network—it's faster and cheaper. Lightning Network (Bitcoin) and state channels are off-chain solutions. L2 rollups execute transactions off-chain but post data on-chain for security. The tradeoff is typically reduced decentralization or trust assumptions.

Related Terms

Layer 2

L2

Scaling solutions built on top of a base blockchain (L1) that process transactions off-chain while inheriting L1 security.

Lightning Network

A Layer 2 payment network built on Bitcoin that enables fast, low-cost transactions through payment channels.

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Gas Fees

Transaction fees paid to validators/miners for executing operations on a blockchain.

Gwei

A denomination of Ether equal to one billionth of an ETH, commonly used to express gas prices.

Layer 2

L2

Scaling solutions built on top of a base blockchain (L1) that process transactions off-chain while inheriting L1 security.

Layer 1

L1

The base blockchain that provides security and consensus, such as Ethereum, Bitcoin, or Solana.

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