What Are Off-Chain Payments Exactly?

Are you a crypto beginner or a seasoned user? Either way, you may want to reduce costs and, if possible by-pass the blockchain and keep things straight between yourself and the recipient of your payment. That’s exactly what off-chain payments are for.

Off-chain payments are practically payment channels involving 2 parties and are advocated by blockchain enthusiasts as the optimal solution to scale transaction costs and speed. As the name suggests – ‘off-chain’ – they are not carried out over the blockchain.

What makes off-chain payments so attractive is their speed – they basically happen in real time. On-chain transactions, however, do take time to be finalized. In case of Bitcoin, it can take as long as one hour. While PumaPay is working to make on-chain crypto payments fast and easy, some of our payment scenarios will still be happening off-chain.

Okay then, how do off-chain payments work?

As a peer-to-peer payment channel, an off-chain payment can only take place over an Internet connection outside the blockchain network. However, off-chain payments are still secured by the blockchain. Here’s how you can make an off-chain payment and enjoy using PumaPay.

Jeff is a fitness trainer and holds fitness training sessions online. He enabled PumaPay for his services.

Rachel is Jeff’s student. Each time, prior to session commencement, Rachel is required to pay a certain amount of PMA tokens as deposit to guarantee payment at the end of the session.

Jeff has selected a PayPerTime PullContract and opted for a minute-base unit with a price of 1.5PMA per unit.

Every 15 seconds Rachel’s wallet signs a certificate for an additional amount of PMAs and delivers it off-chain to Jeff. The receipts are issued incrementally, with the first one being released after 15 seconds, the next after 30 seconds and so on. A PullContract is created for the fitness session, which will last 2 hours.

Rachel scans the QR code (PullContract) and receives a notification stating the purpose of the transaction – fitness class with Jeff, charged 1.5PMA/minute, with time calculated at 15 seconds intervals, and her account being charged every 5 minutes in advance. This means a charge of 1.5PMA per minute will occur 5 minutes before the expiry of 1 hour until the full amount of 180PMA is settled. Any unused funds will be returned to her at the end of the class.

Rachel accepts the PullContract and the amount of 7.5PMA is pulled from her wallet as deposit. Now a peer-to-peer channel is open between her and Jeff.

The fitness class has started. Jeff and Rachel are communicating and so are their wallets.

At the end of the session, Jeff’s wallet posts the last certificate to the PullContract, using the EndSession method. The PullContract sends 165PMA to Jeff’s wallet. The remainder of 7.5PMA from Rachel’s deposit is sent back to her.

Thus, bringing the versatility of credit card payments to the blockchain, PumaPay can technically allow any type of off-chain payment types such as pay-per-view as with certain web-based services and any other similar scenarios.

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