How Does a Private Mempool Differ from an Off-Chain Settlement Layer?
A private mempool is a private communication channel for submitting a transaction for eventual inclusion on the main chain (Layer-1). The transaction's execution and settlement still occur on-chain.
An off-chain settlement layer (like a Layer-2 rollup or sidechain) executes and settles the transaction entirely outside of the main chain, only posting periodic proofs or state updates back to L1. The private mempool addresses front-running by hiding the order; the off-chain layer addresses it by moving the execution environment.
Glossar
Off-Chain Enforcement Challenges
Challenge ⎊ Off-chain enforcement challenges arise when a smart contract's execution logic dictates an action in the real world that cannot be automatically compelled by the blockchain protocol itself, particularly in complex financial derivatives.
Off-Chain Keeper Actors
Function ⎊ Off-chain keeper actors are external entities that execute specific functions on behalf of smart contracts.
On Chain versus off Chain Trades
Trade ⎊ The distinction between on-chain and off-chain trades in cryptocurrency and derivatives markets fundamentally relates to the execution and settlement location of transactions.
On-Chain Trade Settlement
Settlement ⎊ On-Chain trade settlement represents the finalization of a financial contract directly on a blockchain, eliminating traditional intermediaries like clearinghouses and central counterparties.
Private Mempool Concepts
Privacy ⎊ Private Mempool Concepts involve specialized transaction relay networks that allow users to submit cryptocurrency and derivative orders directly to block producers without broadcasting them to the public network mempool.
Off Chain Cost Savings
Efficiency ⎊ Off-chain cost savings represent the reduction in transaction fees and computational overhead achieved by executing the majority of a trading or settlement process outside of the main blockchain layer.
Off Chain Auditing
Audit ⎊ Off Chain Auditing involves the external verification of assets or operational data held or managed outside the native blockchain environment that supports a crypto financial product.
Off Chain Data Resolution
Resolution ⎊ Off chain data resolution is the process of determining a definitive, external data point, such as a cryptocurrency price index or volatility metric, outside of the resource-constrained environment of the blockchain.
Off-Chain Sequencing
Architecture ⎊ Off-Chain Sequencing refers to the process where the ordering of transactions for a Layer 2 network, such as an Optimistic or ZK-Rollup, is managed by a designated entity outside of the Layer 1 blockchain's consensus mechanism.
Off-Chain Relaying
Relaying ⎊ This mechanism involves designated entities, often called sequencers or watchtowers, responsible for transmitting validated state transitions or transaction summaries from an off-chain execution environment back to the main chain.