Onchain
What is verifiable - and what is merely asserted
What is it?
The distinction sounds technical and is really one about provability.
Onchain is whatever is recorded in the blockchain: every movement, every balance, every rule of a smart contract. It is open to anyone, at any time, without asking permission.
Offchain is everything else: who owns a company, what reserves it really holds, what it writes on its website, what an employee promises.
An example
A provider states that its tokens are fully backed by dollars. The number of tokens issued is onchain - you can count them. Whether the dollars are actually in an account is offchain - you can only take it on trust or have it audited.
Only both together make a statement. One half is verifiable, the other is not.
Where does a risk come from?
From the fact that the two look equally solid as soon as they stand side by side on the same page.
| The gap goes unnoticed | An application shows onchain data and offchain statements in the same table. The viewer sees no difference. |
|---|---|
| The crossing is the weak point | Wherever something comes in from outside, a place arises that has to be trusted. That is the job of an oracle. |
| Onchain does not mean correct | All that is verifiable is that something was recorded. Whether it is true is another question. |
Why this matters for cover
Because a cover can only assess as well as its event is verifiable.
A covered event that can be established onchain - this contract lost funds in this period - needs no taking of evidence. It is written there.
An event that lies offchain - a company is insolvent, a reserve never existed - requires a determination by somebody. That makes it important who determines it and how long they have. The answer is in the wording.
Where this leads
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The place that brings offchain statements onchain - and what happens when it is wrong.
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A case where onchain and offchain are inseparably linked.