On-chain / off-chain
On-chain means something is stored or settled directly in the blockchain; off-chain means it happens outside of it.
Explained simply
A payment between two wallets is on-chain: it sits in the register forever. A trade inside a crypto exchange is usually off-chain: the exchange nets internally, and only deposits and withdrawals touch the blockchain.
Both have their place. On-chain is transparent and final but slower and more expensive. Off-chain is fast and cheap but requires trust in the operator.
From the familiar world
A transfer between two banks runs through the central bank (on-chain). A transfer between two accounts at the same bank happens only in its own system (off-chain). From the outside both look like a transfer.
An example
When you buy Bitcoin on a crypto exchange, only an entry in the exchange's database changes. Only when you withdraw the coins to your own wallet does an on-chain transaction occur.
Why it matters
The distinction explains why an exchange failure can hit clients: off-chain balances are claims against the exchange, on-chain balances belong directly to the key holder.
To pass on
„On-chain is in the big shared register, off-chain only in one provider's database. That makes the difference in a bankruptcy.“
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