In the cryptocurrency and blockchain world, many activities happen on a network chain. This process is often referred to as "on-chain transactions," even though the concept has spanned more than just financial purposes. From a security and transparency viewpoint, no one cannot alter these transactions later on.
The Purpose Of On-Chain Transactions
Something needs to change in a financial world where chargebacks, reversals, and funds being put on hold are far too commonplace. Rather than requiring multiple banks or other institutions to sign off on transactions, it may be a better option to achieve consensus by other means. In the cryptocurrency world, that occurs through on-chain transactions, which appear on the blockchain and are no longer subject to changes after the fact.
More specifically, every on-chain transaction is visible on a distributed and public ledger. To acquire this state, transactions need to be validated and authenticated by the users who support the network. In Bitcoin's case, that validation and authentication occur through miners and network nodes. There is no central figurehead running the show, nor is there a need to confer with anyone outside the network. As a result, it is a viable approach to achieving consensus faster, cheaper, and more transparently.
Once an on-chain transaction receives a certain number of network confirmations, it will no longer be possible to reverse that transfer. When using a blockchain infrastructure, one can only change a transaction if most miners agree. As there is no need for this ever to happen - users are responsible for how they handle and spend their funds - a reversed transaction on significant public networks like Bitcoin is a rarity.
Several Use Cases
Whereas one may think on-chain transactions only pertain to sending money between accounts, that is no longer the case. Although the recording of such transactions is an essential part of any cryptocurrency ecosystem, it is only one of the many possible use cases. Financial transactions are the main draw for Bitcoin, but other blockchain ecosystems, such as Ethereum, Edgeware, NEO, etc., all have their own functionality that will occur through on-chain transactions.
For Ethereum and NEO, for example, the use of smart contracts is essential. Moreover, as an extension of blockchain technology, smart contracts can be used to create many products and services. There are many ways to implement these on-chain transactions into more complex concepts, ranging from prediction markets to decentralized finance and decentralized gambling. These activities occur through on-chain transactions and are visible for anyone to see without the use of special software or knowledge.
One can find a similar venture with Edgeware, a smart contract chain with a network of Decentralized Autonomous Organizations or DAOs. The project leverages on-chain transactions for multiple purposes, including an on-chain treasury to fund and explore new ideas and community governance to oversee the future of this project. Due to its convenient nature to deploy Ethereum-based smart contracts with few or no changes, Edgeware's many collectives - funded by the on-chain treasury - can be a good fit for builders and organizers globally.
The use of on-chain transactions gives rise to concepts such as owning one's identity. Controlling your data, setting up or joining Working Groups, building an online reputation, and so forth. With the correct infrastructure in place, many potential use cases can be unlocked to empower users globally and wrest away control from centralized entities, such as banks and governments.
Closing Thoughts
The concept of on-chain transactions may sound financial in nature but can encompass many more things. Data transfers, smart contract interactions, voting, and governance are just some of the potential options to explore. To enter the next stage of development, the underpinning technology needs to keep evolving and focus on providing reasons for developers to explore different solutions. Making it easy to port over existing creations and expand upon them further through another blockchain's technology is an essential step in that direction.
As more real-world examples of on-chain transactions become apparent, overall interest in blockchain technology and smart contracts will increase further. However, developers are only now exploring the tip of the iceberg of possibilities. In addition, some ecosystems leverage on-chain transactions more outspokenly to create a broader sense of empowerment and transparency. It is time to make technology about the people again and restore power to everyone rather than just a select group of decision-makers.
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2021-06-08 14:33:12
