Off-chain means handled outside the blockchain being discussed. Data or activity can be off-chain even if it later connects with, or is settled on, a blockchain.
Examples of off-chain activity
Bitcoin’s Lightning Network provides one example. Its channels open and close on Bitcoin’s blockchain, while individual payments between channel participants occur off-chain rather than each appearing as a Bitcoin blockchain record.
Ethereum documentation describes state channels that can handle many transactions off-chain, using on-chain transactions to open and close a channel. Off-chain can also describe external data: oracles make off-chain data available to smart contracts.
What off-chain does not mean
Off-chain does not automatically mean unrecorded everywhere, private, anonymous, secure or guaranteed to be settled on-chain. It simply identifies activity or data as outside the records of the blockchain in question.
It is also not one technology. A payment channel and an external source of data are different arrangements, even though both can be described as off-chain in context.
Sources
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