Off-chain transactions are covered in full under Transaction Off-Chain, which explains their mechanics and risks. This page explains the more common word order and the main forms these transfers take.
An off-chain transaction is a movement of value that is not broadcast to a blockchain and confirmed in a block at the time it happens. Instead, it is recorded somewhere else and only settled on the chain later, or never. The best-known forms are:
- Internal ledger transfers. When two customers of the same centralised exchange swap coins, the exchange simply updates its own database; no network fee is paid.
- Payment channels. Two parties lock funds in a state channel and exchange signed balance updates privately, publishing only the opening and closing positions.
- Vouchers and credits. Gift codes or IOUs redeemable for crypto change hands without the underlying coins moving.
The appeal is speed, privacy and near-zero cost, which suits small and frequent payments. The trade-off is trust: an exchange transfer is only as safe as the exchange's custody, and channel users must watch for a counterparty trying to close with an old balance. Transfers recorded on the main chain itself are described under transacting on-chain.