Definition ∞ Off-chain failure refers to a malfunction or security breach that occurs outside the main blockchain ledger, typically involving centralized entities, exchanges, or associated services. These failures can compromise user funds, data, or access to digital assets without directly affecting the integrity of the underlying blockchain protocol. Examples include exchange hacks or custodial service issues.
Context ∞ News frequently reports on off-chain failures, highlighting the risks associated with centralized intermediaries in the crypto space. These incidents often lead to significant financial losses for users and raise questions about the security practices of various platforms. The discussions surrounding off-chain failures underscore the importance of self-custody and robust security measures for digital asset holders.
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