Definition ∞ An off-chain scheme refers to any transaction, process, or agreement that occurs outside the primary blockchain network. These activities are not directly recorded or validated by the main distributed ledger. While often used to improve scalability and reduce transaction costs, off-chain schemes rely on various mechanisms to maintain security and integrity. They typically involve a trusted third party or a system of cryptographic proofs to settle actions back on-chain.
Context ∞ In the digital asset ecosystem, off-chain schemes are prevalent in various forms, including centralized exchanges, payment channels, and sidechains, aiming to enhance transaction throughput. While offering speed and efficiency, they introduce elements of centralization or require trust assumptions that contrast with core blockchain principles. Debates focus on the security implications and regulatory oversight of assets held or transacted through these external systems.
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