What Is the Difference between an On-Chain and Off-Chain Computation in an Oracle System?
On-chain computation refers to data processing that occurs directly on the blockchain, which is transparent and highly secure but expensive and slow due to gas costs. Off-chain computation is data processing performed outside the blockchain network, which is faster and cheaper.
Hybrid oracle systems use off-chain computation for efficiency and then submit the final, verified result on-chain for smart contract use.
Glossar
Computation
Derivation ⎊ Computation, within cryptocurrency, options trading, and financial derivatives, represents the algorithmic processes used to determine pricing models, risk assessments, and execution strategies; it’s fundamentally the translation of market data into actionable insights.
Oracle Systems
Attestation ⎊ Oracle systems, within cryptocurrency and financial derivatives, function as critical middleware connecting blockchain smart contracts to external data sources, ensuring data integrity and reliability for decentralized applications.
On-Chain
Ledger ⎊ The term "on-chain" fundamentally denotes data and activity recorded directly onto a blockchain, a distributed, immutable ledger.
Data Processing
Latency ⎊ Rapid processing of market data, including order book updates and trade executions across global crypto exchanges, is fundamental for maintaining a competitive edge in derivatives trading.