Bitcoin off-chain transactions are transactions in bitcoin that are not recorded on the blockchain.1 Today, most bitcoin transactions occur off-chain.2 This dynamic runs counter to the quintessential principle espoused in the initial white paper conceptualizing bitcoin—that transactions would be immutably and reliably recorded on a public ledger.3 As regulators voice concerns over bitcoin’s divorce from its ledger technology, this explainer provides an understanding of this innovation’s implications on privacy, security, settlement speed, and usability.

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