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On-chain transactions refer to transactions made on the Bitcoin blockchain, not second layers like the Lightning Network

On-chain transactions are so-called “normal” Bitcoin transactions that go through all the processes of Bitcoin mining. They are the transactions that enter the mempool, aggregated into blocks, and eventually, every Bitcoin miner will mine those blocks and broadcast the transactions to the Bitcoin network. Once posted, the on-chain transactions cannot be reversed or altered unless the majority of the network agrees to do so (or a 51% attack is successful), which makes them incredibly immutable.

There are some disadvantages to on-chain transactions. Although they are very secure and verifiable once they make it to the blockchain, they don’t always post instantly. On-chain transactions take more time to confirm the busier the Bitcoin blockchain becomes, which reduces the throughput and overall transaction speed of Bitcoin. On-chain transactions confirm within 10 minutes on average, but that can vary greatly from 1 minute to 1 hour. Slow confirmation times are one of the main criticisms of Bitcoin existing as a global medium of exchange. However, the Lightning Network fixes this.

On-chain transactions also require a mining fee to incentivize miners into including a given transaction on the next or upcoming block.