On-chain vs Off-chain vs Multi-chain
More and more organizations have their blockchain-based data solutions, either on-chain or off-chain. They achieve this by storing their data in a private or publicly accessible blockchain service.
What is on-chain? Does Off-chain mean the data is not on a blockchain? What is multi-chain? Why is Surehive utilizing multi-chain? This article answers all these questions.
Let’s start by analyzing from the very beginning — Blockchain.
In its simplest form, On-chain transaction means all transactions reflect on a public ledger and is visible to all the participants on the blockchain network. On the other hand, off-chain means all agreements are strictly between the parties involved and are not visible to other parties on the blockchain.
On-Chain transaction refers to valid transactions when transacted on a public ledger. These transactions require many participants to verify transactions and their validation signatures need to be an exact match for the transaction to be considered valid. This process must be published on a public blockchain for inspection so that the transactions can neither be changed nor reversed.
Great as on-chain transactions are, it takes a long time to validate transactions. Next, the transactions could be expensive. With these two downsides, what next?
To start with, Off-chain does not mean “not on the blockchain,” it means that it’s not on a publicly accessible service. Next, it is the direct opposite of on-chain transactions. This means it is faster and less expensive than on-chain transactions. Users will need to open a channel and exchange private keys to a particular wallet for off-chain transactions. Once this is done, they can swap currencies as often as possible until they are ready to settle. Once they settle, they can close the channel and record the final tally on-chain.
On-chain versus Off-chain
When deciding on how to complete transactions, some factors should be considered. If you are looking for fast, cheap, and private transactions, you should opt for off-chain transactions. But if you are looking for security, validations, and immutability, you should consider on-chain. Lastly, On-chain transactions are best for cryptocurrency transfers, whereas off-chain transactions are non-crypto related.
Surehive and the multi-chain solution.
Decentralized Finance is growing; hence, constant updates to existing ones are needed. Next, the DeFi market is customer-centric. This means users’ demand shapes the market. Investors tend to turn to blockchains that serve them well — and to a protocol that offers solutions to problems that pertain to them.
Investors want, at best, DeFi protocols that support more than one blockchain. In the case of Surehive, we support Cardano, Ethereum, and a few other blockchains that are established leaders for trading, staking, Non-Fungible Tokens (NFTs), and more. And the more chains investors can interact with, the more reason they have to stick to the protocol. That brings us to the last part of the post — Multi-chain.
Multi-chain is critical to the future success of DeFi products, hence why Surehive adopted multi-chain.
Today, nearly all DeFi projects are being built on the Ethereum blockchain. But it comes with a challenge — scalability. Others include costly gas fees, congestion, and a complicated onboarding process.
To put it into perspective. Imagine Ethereum is a city built on layer-one blockchain. The city is congested, expensive, and admitting people into the city is complicated. Then there is another village, a layer-two blockchain village. It is less congested, cheaper, and may offer lesser security. Then you have the last blockchain — a bridge. This bridge connects the village to the city and makes it easy for people to move around and move across these two locations. That bridge is the future of DeFi. That bridge is multi-chain. Multi-chain brings about cheaper transactions, faster transactions, frictionless experience for end-to-end users, and lots more.
Instead of competing and asking which blockchain is better, multi-chain allows different blockchains to communicate with one another without the help of intermediaries, mimicking how the internet works today — friends connect and chat with each other without asking for network providers.