A Guide To Understanding Sidechains

What is a sidechain?

A sidechain is a side blockchain that is linked to another blockchain, which is known as the primary blockchain or main blockchain. There is a two-way link between this sidechain and the primary blockchain to ease the exchange of data.

How does it work?

First, the user on the main chain has to send the coins to an external address where they get locked and so doesn’t allow the user to spend it elsewhere. Once this happens, a message gets communicated to the sidechains, which is followed by a waiting period. After this, the coins get released on the sidechains to be accessed. This process is reversed when the coins are to be moved from the sidechains to the main chain.

The vision of the sidechain is to create a decentralized network of different blockchains that function independently, yet form a continuous ecosystem. And within this ecosystem, the exchange of tokens and digital assets takes place freely via the main blockchain.

Examples of SideChains

The Liquid Network is a network of sidechains for traders and exchanges to enable faster and more secure Bitcoin transactions.

Ethereum 2.0 has various sidechains which are called shard chains. These shard chains are linked to the newly launched chain, Beacon Chain, which is to become the main chain of the PoS (Proof-of-Stake)-based Ethereum.

Advantages of Sidechains

Sidechains are not intended to be a replacement for blockchains, but to address blockchain concerns. The two primary advantages of sidechains are scalability and flexibility.

Sidechains are flexible because they allow for working with different cryptocurrencies simultaneously. There can be different sidechains for different cryptocurrencies, which can then get linked to the main blockchain and exchanges can be carried out easily.

Another advantage of sidechains is that you can initially test new software on them to see if the software is unstable and causes any disruption. The damage is then just limited to that sidechain instead of the main blockchain.

Final Thoughts

All in all, understanding the concept and implementation of sidechains might feel difficult, especially for the newbies in the crypto market. But if handled meticulously, sidechains can help solve a lot of problems with blockchains.

At Kointrack, we make blockchain technology more accessible to people. And we bring to you the latest information on the current trends in the crypto market.