Do cryptocurrency exchanges use offline transactions?And if yes when they use it?Also is offline transactions somehow related to off chain transaction?
1 Answer
Businesses that provide accounts can transfer notional amounts of money between two of their customers, debiting one customers account and crediting a second customer's account. They can do this without using the Bitcoin network. Without using the Internet (so offline in that sense). All they are doing is changing some numbers in their own computer, separate from everyone else.
An off-chain transaction is one that is not recorded in the Blockchain. For example, a Bitcoin transaction in the Lightning Network is not recorded in the blockchain so is off-chain but it is online not offline - because it involves data communication between multiple parties across the Internet.
| on-chain | off-chain | |
|---|---|---|
| online | bitcoin | lightning |
| offline | not possible | exchange customer-customer |
The intersection of two of many ways of categorising transactions denominated in Bitcoin.
answered Dec 6, 2023 at 10:29
-
So technically yes,exchanges uses offline transactions.Am i right?– juhasaCommented Dec 6, 2023 at 11:27
-
Exchanges also use online transactions. For withdrawals and for payments by customers to non-customers. Commented Dec 6, 2023 at 11:43
-
I guess that offline transactions doesn't require blockchain confirmations,right?– juhasaCommented Dec 6, 2023 at 13:24
-
1@juhasa: Imagine that you and your friend Alice both have an account with some bank. You ask the bank to wire $10 to Alice. They just update your account balance to deduct $10, and increase Alice’s account balance by $10. Since they are only updating their own accounting, they can do that at their own leisure. It’s the same with an exchange. If however you want to wire money to Bob that has an account with a different bank, they’d actually need to wire money from bank to bank. In the Bitcoin context that would need a transaction going "on-chain".– Murch ♦Commented Dec 6, 2023 at 15:06