What Are Sidechains? Scaling Blockchain on the Side

Read on to learn what sidechains are, how they work, and which crypto projects are using them.

Feb 04, 2021
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What Are Sidechains Otp

Key Takeaways:

  • A sidechain is a separate, independent blockchain linked to the main blockchain (mainchain) using a two-way bridge.
  • It enables tokens or other digital assets to be transferred between the mainchain and the sidechain.
  • A sidechain can be public or private, and each sidechain has its own token, protocol, consensus mechanism, and security.
  • Sidechains can be used to run blockchain applications like decentralised apps (dapps), taking some computational load off the mainchain and helping to scale the blockchain.

Introduction

Blockchain’s biggest challenge is scalability. This is often known as cryptocurrency’s ‘holy grail’ and one of the key elements holding blockchain back from hitting the mainstream and competing directly with payment systems like Visa and PayPal. In this piece, we delve deeper into a promising solution to the issue: sidechains. Read on to learn what sidechains are, how they work, and which ecosystems are using them.

What Is a Sidechain?

The theory behind sidechains was first mentioned by Dr Adam Back in his paper ‘Enabling Blockchain Innovations with Pegged Sidechains’. As a separate blockchain linked to the main blockchain (mainchain) using a two-way bridge, a sidechain enables tokens or digital assets to be transferred between the mainchain and the sidechain.

Whether public or private, each sidechain is an independent blockchain network with its own token, protocol, consensus mechanism, and security. Additionally, multiple sidechains can be connected to the mainchain depending on the design of the blockchain, and inter-sidechain communication is also possible using the mainnet as a relay network.

Sidechains can be used to run blockchain applications, known as decentralised apps (dapps), and take some computational load off the mainchain as a way to scale. They can also be coupled with other scaling solutions.

A typical sidechain implementation creates a transaction on the first blockchain (the mainchain) by locking the assets, then creates a transaction on the second blockchain (the sidechain) and provides cryptographic proofs to the transaction that the assets were locked correctly on the first blockchain.

Typical Sidechain Implementation May 24 Ft

Although sidechains look like a promising solution, they add complexity to the blockchain design and require a lot of effort and investment for the initial setup. Since sidechains are independent blockchains, their security can potentially be compromised since they are not secured by the mainchain. On the other hand, if a sidechain is compromised, it won’t affect the mainchain, so it can be used to experiment with new protocols and improvements to the mainchain.

Plasma Chain

Plasma is another Layer-2 scalability solution for the Ethereum blockchain. It’s a framework for creating a sidechain (also known as child chains or plasma chains) that interacts with the Ethereum blockchain. The plasma architecture is a hierarchical tree of sidechains, and since each sidechain operates independently and runs parallel to the mainchain and other sidechains, speed and efficiency are optimised.

Additionally, each sidechain can be used to process unique applications in the same secure ecosystem. A smart contract — which contains rules, token exchange rate, and state hashes of the sidechain — is created and deployed on the mainchain at the time of sidechain creation. Block commitments flow down, and exits can be submitted to any parent chain, ultimately being committed to the root blockchain. 

Plasma Chain Contracts May 24 Ft

For those who want to learn more about speeding up and scaling blockchains, read about the different types of consensus mechanisms.

Due Diligence and Do Your Own Research

All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any coins, tokens, or other crypto assets. Returns on the buying and selling of crypto assets may be subject to tax, including capital gains tax, in your jurisdiction. 

Past performance is not a guarantee or predictor of future performance. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility.

Tags

Blockchain

crypto

DApps

plasma sidechain

scalability

scaling

sidechain protocols

sidechains

smart contracts

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