Refers to blockchain transactions that are processed outside the blockchain. Due to the limitations of on-chain transactions, including a blockchain's scalability, speed, and cost, off-chain transactions and Layer 2 protocols were introduced to help Layer 1 blockchains deal with congested networks and slow processing speeds.
Example
“A Bitcoin user sent a payment through the Lightning Network, an off-chain solution that settled the transaction instantly for a fraction of a cent in fees.”