5min read
Published on: Apr 30, 2024
#Blockchain
Have you ever wondered if you could write a tough exam with a smarter buddy even if both of you are competitors?
It not only takes the stress off your mind but also makes learning new topics and scoring high marks easier.
You might be wondering why we are talking about tough exams or Tom & Jerry reading together to ace a test.
The topic we are covering today is a sidechain, a critical component of the modern blockchain infrastructure.
A sidechain is, as the term suggests, an additional blockchain that supports the functioning of a main blockchain or mainnet or a parent blockchain.
If Jerry is the blockchain, Tom is the sidechain carrying the maximum load and stress.
Adam Back, Blockstream CEO and the inventor of HashCash, first introduced the concept of a sidechain in an academic paper in 2014.
Others who contributed to the paper were blockchain leaders Matt Corallo, Luke Dashjr, Mark Friedenbach, Gregory Maxwell, Andrew Miller, Andrew Poelstra, Jorge Timón and Pieter Wuille.
The paper proposed,
“We propose a new technology, pegged sidechains, which enables bitcoins and other ledger assets to be transferred between multiple blockchains. This gives users access to new and innovative cryptocurrency systems using the assets they already own.”
To understand the concept of sidechain in blockchains in simple terms, let’s take an example.
Imagine you are going with your friends on a bike riding trip to the mountain, but the traffic congestion leads to your group slowing along the way.
Don't you wish that there were more ways to circumvent the traffic? Isn't this why there are service roads around several towns?
A sidechain is to a parent chain what a service road is to a main road.
A sidechain is a supplementary blockchain that is connected to a parent blockchain.
For instance, Rootstock (RSK) is a popular sidechain over the Bitcoin (BTC) blockchain. Polygon (MATIC) is a popular sidechain over the Ethereum (ETH) blockchain.
What a sidechain does is helping a parent blockchain maintain, process and manage data load. As more and more projects onboard a blockchain, it becomes more congested though popular.
In essence, a sidechain is a scalability solution that is helpful in decongesting the network and making a blockchain more scalable.
Similar to the parent blockchain, a sidechain also has its own consensus mechanism so that the entire, combined blockchain network can be secure and private.
A sidechain facilitates a quick transfer of data, including tokenised assets, with the parent blockchain.
Very often, two blockchains are like two different islands which cannot interact with each other.
But nearly every problem has a solution.
A sidechain is connected to a blockchain through an interoperable solution called a blockchain bridge.
What happens is that once you transfer funds into a smart contract on the parent blockchain, it gets sent to the sidechain via a blockchain bridge.
But wait, you aren’t receiving the same tokens on the sidechain.
In fact, you are receiving new assets representing those tokens of value on the sidechain.
Here is how this whole process takes place.
When you transfer assets to the output address, they stay locked up on the parent blockchain.
Shortly, you receive new assets to represent those tokens on the sidechain.
Once the function of sidechain is done, you can move those assets back to the parent blockchain using the bridge.
Once the assets on the sidechain disappear, your tokens are back on the parent blockchain.
We can thus conclude that the sidechain is a mirror of the parent blockchain or mainnet.
The bridge connection is made through a smart contract and a two-way peg.
What does that mean? A two-way peg enables data transfer from the parent blockchain to the sidechain and vice versa as well.
Note that there is no real transfer of assets that actually takes place between these two chains. This is where a smart contract steps in to enable the creation of duplicate assets on the chain assets are being sent to.
A complex mechanism, indeed.
Maybe, a flowchart would help you understand it better.
The introduction of sidechains to the broader blockchain infrastructure has only helped the network.
Let us look at a few benefits offered by sidechains:
Note that there are a few drawbacks too when you use a sidechain for a project.
Centralisation: Not all, but some sidechains run the risk of getting centralised and violating the ethos of decentralisation that is central to blockchain technology.
By now, we know that a sidechain is a complex innovation in Web3 and seems to further complicate the transfer of data and assets on a blockchain network.
But the matter is quite different.
The addition of the sidechain not only brings the scalability but also lowers transaction costs and improves transaction count.
The benefit of interoperability, coupled with those of scalability, customisation, upgradability and functionality, offered by sidechains allow users to seamlessly navigate across various projects.
Sidechains are here to improve the existing blockchain technology further.
Recommended Read: Breaking Down Blockchain Technology
There is no doubt that in the next few years, sidechains will take the dynamic blockchain technology to a significantly higher number of applications in the industry.
This article is for informational purposes only and not intended as investment or financial advice. It contains opinions and speculations that are subject to change without notice.
The author and publisher disclaim any liability for decisions made based on the content of this article. Readers are advised to conduct their own research and consult a financial advisor before making investment decisions.
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