Off-chain

The first blockchains like Bitcoin were created more than 10 years ago. Due to their age, they are not performant enough to handle the needs of modern applications. For example, Bitcoin can handle only 7 transactions per second, which is not nearly enough to meet current demand. As a result, transaction times have slowed to a crawl. As the number of pending transactions has increased, so has the cost of transaction fees, and paying for individual transactions has become completely impractical. It's ridiculous to pay, for example, $10 for a single transaction.

This is where so-called "layer-2" come in. A layer-2 solution dramatically increases the speed and reduces the cost of transactions. Transactions are not performed in the blockchain network itself, but instead are executed outside of the blockchain and synchronized to the blockchain periodically or upon request. It is possible for an application to live in the off-chain layer for 99% of its lifetime and only synchronize to the blockchain when required.

Tatum creates an off-chain layer on top of its blockchain and virtual account capabilities, combining the best features of both techniques. With off-chain methods, it is possible to connect specific blockchain addresses with virtual accounts, enabling the automatic synchronization of incoming blockchain transactions. It is also possible to group multiple blockchain addresses into a single virtual account, allowing the balance of all addresses to be viewed as one, which is very convenient for Bitcoin or other blockchains that require a new blockchain address for each incoming transaction. There are many more built-in off-chain features that we will talk about later.