While blockchain technology has been applauded as a highly successful, disruptive force, it's not without its complications, especially when considering issues like scalability and Blockchain bloat. While the impressive reputation is well deserved, it's not without its fair share of needs for modification to its existing architecture in order to solve it.
One of the things that Sidechains allow developers to do is deploy blockchain solutions that can quickly and effectively scale, reducing the underlying cost and under a high level of security as guaranteed by the technology. Sidechain are often and sometimes commonly referred to as ‘ChildChains'.
So, if you're one of those people that have been wondering for some time about what this technology is, then here is your one-stop for that. We aim to solve a lot of your unanswered questions through this piece.
So, What On Earth Are SideChains And ChildChains?
To begin with, there are two concepts that are important to understand at this stage: first is the main chain, and the second is the Sidechain. The best visual metaphor to use is to imagine the mainchain is the highway; because it's where the bulk of activities and movement take place. Meanwhile, Sidechains operate as filter roads off that main highway, giving vehicles or information the power to filter off and on the mainchain where necessary.
In a fundamental reading, we should think of sidechains as being a discrete, secondary blockchain which is linked and operates in and around the mainchain via two way pegs. The underlying functionality of side chains holds a great deal of potential for the enrichment of the capabilities of existing blockchains.
This Two-way peg system allows for assets to be readily interchanged between the main / parent blockchain and the side-chain; for example, using Bitcoin as the asset for a separate blockchain.
The rate at which these assets are exchanged between the main Blockchain and the childchain is usually predetermined.
So, How Do Sidechains Work?
In order to successfully harness and use a sidechain, a user on the mainchain has to send their funds to, what is referred to as an ‘output address'. Once the coins have been successfully placed in this address, they're locked, meaning that the user will no longer be able to use these coins anywhere else.
This functions as a measure of increased security for the user, along with the system providing communication across the mainchain and sidechain, and a waiting period which is put into effect whenever assets are moved from one to the other. Once this waiting period is concluded, a corresponding amount of coins is released on the sidechain. The user is then able to spend the coins on the sidechain.
The Underlying Technology
A Federation refers to a group of servers that act as an intermediary or in-between point between the mainchain and sidechain. The Federation then decides when the user's coins should be locked, how long for, as well as when they are to be released. The developers of the sidechains can choose the members of the federation. The downside to using federations is that they add another layer between the sidechains and the parent chain.
One of the advantages that sidechains bring is that they are wholly independent from their mainchain. As a result, Sidechains can take care of their own security, meaning also that any issues that arise in the sidechain won't cause any issues for the wider mainchain. Likewise, a security problem on the mainchain does not affect the sidechain although the value of the peg is greatly reduced.
Sidechains, however, do require their own miners, but these same miners can be given the added incentive of merged mining. If you are new or unfamiliar with this concept, this is when two separate cryptocurrencies with the same algorithm are mined at the same time.
The Major Names In The Sidechain Game
Operating as an open source, smart contract platform with a two-way peg to the cryptocurrency, Bitcoin. Rootstock allows Bitcoin miners to participate in the smart contract revolution by providing them with rewards such as by merge-mining. The project aims at adding value and functionality to the Bitcoin network by enabling near-instant payments, higher scalability, and smart contracts.
On its own, Bitcoin lacks the turing-complete smart contract abilities that others do, which places it at a significant disadvantage compared to rival cryptocurrencies. RST manages to step in and provide the otherwise unavailable technical needs as a blockcahin with a two-way peg to Bitcoin, since the sidechain doesn't have any coins of its own, it doesn't offer any direct competition to Bitcoin.
Merge mining secures Rootstock. Effectively, this means that the blockchain's security is at the same level as is seen from Bitcoin. The two-way peg security will also rely on a federation holding custody of Bitcoin before switching to an automatic peg system, this is for when the security trade-offs of the automatic peg getting accepted.
RSK scales to 100 transactions in a second while still ensuring the position of decentralization and the reduction of bandwidth usage and storage. The chain is successful in employing fraud profs, probabilistic verification, and Blockchain sharding techniques.
This refers to a projected framework of incentivized and enforced implementation of smart contracts. Plasma is scalable to billions of state updates in a second. This enables the blockchain to effectively represent a high number of decentralized financial applications worldwide.
Alpha operates as a sidechain to the testnet for Bitcoin. The peg mechanism, at the moment, operates through a centralized protocol adapter, as stated in the whitepaper of the sidechain. An auditable federation of signers manages coins from the Testnet that have been transferred to the sidechain. The federation is also relied upon to produce blocks through the signed blocks element.
This creates the possibility of exploring the possibilities of the new chain using different security trade-offs.
Functioning as one of Blockstream's very first commercial sidechain. Liquid serves to facilitate the immediate transfer of funds between exchanges without having to wait for the delay of confirmation in the Bitcoin blockchain. Liquid is available to users of all participating Bitcoin exchanges.
POA functions as an open sidechain for Ethereum with proof of authority consensus, which is reached by a series of independent evaluators. The project's ultimate goal is to build a public network for small contracts that serves in a fast, secure, and cost effective way. POA provides a consensus mechanism that allows for very fast block times of less than 5 seconds on average.
One of the other features of POA is a built-in governance system which supports voting at a consensus level, this works by allowing validators to vote for adding or removing validators on the governance dApp. The POA network also provides support for a large assortment of proof of identity dApps and incorporates them to prove the identity of validators.
Unlike other blockchain systems, which would require a vast amount of computational resources and proofs of work, creating blocks within POA's chain doesn't require mining. The POA network model can be used as a blueprint for quick launching of open on-premise networks with built-in value.
The Advantages Of Sidechains
The implementation of sidechains provide two distinct advantages. The first advantage of using one is that they have is that they are a permanent feature. You won't have to create a brand new sidechain every time you'd need to use one. Once a sidechain is built and added to the framework, it's maintained and can be put to use at anytime by anyone doing a specified task off the mainchain.
One of the other advantages of using a sidechain is that they allow for immediate interaction between various kinds of cryptocurrencies. Developers get the opportunity to test software upgrades as well as beta coin releases before they are released on the main chain.
The Disadvantages Of Sidechains
One of the disadvantages is that miners are crucial in order to ensure the safety of any sidechains that are in operation. This makes the formation of sidechains a costly thing to commit to if you're uncertain of their necessity. A significant amount of investment has to be made before any new kind of sidechain can be created.
One of the other disadvantages to other sidechains is the requirement of a federation. The extra layer formed by the federation could prove to be a weak point for attackers.
In order to scale blockchain, the implementation of sidechain or childchain solutions cannot be understated as a feasible solution. Sidechains are separate blockchains which are linked to the main blockchain via the use of a two-way peg. Sidechains function as an auxiliary network that provide and execute complementary functions of faster transactions, while reducing the cost of transactions, and increase the potential for scalability in terms of the number of transactions that the network can effectively support at any given time.
In summary, sidechains are expected and utilized in order to bring about a significant range of improvements in the capabilities of existing Blockchains. They are one of the ways in which blockchain can be saved from a premature obsolescence.