Can Someone Explain "Off-Blockchain Transactions" ?

[Ron~Popeil]

There is a project underway to build trustless servers for this kind of thing as well. The servers can't change anything they simply record it with proof being the last receipt. A set of servers simply enters transactions and votes on them before issuing receipts. The entries are impossible to alter so there is no need to trust anyone or anything. If i can find the video I saw about it from a bit coin conference I will post it. It really is a fascinating and exciting concept.

[oXo]

Off-chain mainly refer to off block transaction or bitcoin transactions occuring outside the bitcoin network and ones unrelated to addresses (like user-user transfers) that doesn't involve a record on the blockchain (or this is at least what I think they are)

[Imbint]

Coinbase, Circle Financial and other companies similar use off blockchain transactions. They are popular mostly with facilities that sell food. It allows them to complete the transaction without waiting frot the blockchain to respond that the transaction is secure. I don't know if this is good because it is centralizing transactions. However it may be necessary to maintain the flow of business in most locations .

I read in the article below that on block chain transactions are increasing however off block chain transactions are increasing at a faster rate.

http://www.coindesk.com/block-chain-transactions-bad-bitcoin/

[ShakyhandsBTCer]

Put some Bitcoins in a wallet, extract the secret key and write it on a piece of paper (tip: fold the paper to keep the key secret). You now have the ability to make an off-blockchain transaction with that piece of paper.

This is a good example of an off-chain transaction, however once you sell/give that paper to someone else that 2nd person would need to then transfer those coins to an address that they control as the other person (and maybe others) potentially have the private key.

A true off-chain transaction would be one that does not force the counterparty to transfer the coins right away.

[JoelKatz]

So in order to make this work, both parties (buyer and seller) have to be using the same exchange (for example Coinbase), right?

No, because there can be a third party (market maker) involved who uses more than one exchange. You then have a five-party transaction. The sender transfers funds off-blockchain at gateway A from himself to the market maker. In exchange, the market marker transfers funds off-blockchain at gateway B from himself to the recipient.

[ShakyhandsBTCer]

Off-chain mainly refer to off block transaction or bitcoin transactions occuring outside the bitcoin network and ones unrelated to addresses (like user-user transfers) that doesn't involve a record on the blockchain (or this is at least what I think they are)

It is important to note that the entity facilitating  the transactions  has enough BTC to cover all of the coins in question.