As a blockchain development company, at Oodles, we believe that blockchain technology is going to revolutionize the business world. However, it often faces challenges that hinder its widespread implementation and adoption, like scalability and transaction finality. One technology that can supplement the widespread use of blockchain in the future is the sidechain technology.
According to the Blockstream company, a sidechain is a new advanced method for making blockchains scalable. It enables businesses to introduce new features to the market faster than existing blockchains while deriving the security aspects of the mainchain.
In common terms, a sidechain is a separate blockchain that operates alongside the mainnet. It enables advantages like flexibility, liquidity, and speed. Users can use it for transactions and computations, however, the mainchain needs to verify and secure them. A mainnet and a sidechain have a parent-child relationship called linkage, which enables the transfer of digital assets from the original blockchain to the sidechain.
Technically, the following is the process: a user sends some crypto coins from the original blockchain to an output address. Users cannot access or spend them due to being locked at that time. At this point, federations come into play. A federation is a group of servers working as an intermediary between the mainnet and the side chain. It is the federation that defines that for how long the cryptocurrencies can remain locked and when they should be unlocked. Interestingly, sidechain creators enable access to federation membership to any user. Upon transaction completion, users on both sides verify and confirm it, which takes a while for additional security requirements. Once the transaction confirmation period is over, users receive the cryptocurrencies on the child chain (sidechain).
Mainly, sidechains address one of the prevalent issues of traditional blockchains- slow and limited transaction speed. Sidechains diversify a chain into multiple blockchains. It means there is no need to wait for all nodes to reach the consensus for adding the block to the chain.
Along with increasing the transactions, sidechains add more functionality and improved scalability to existing blockchains. On a high-level overview, blockchain tends to get slower in processing transactions, especially at times when the network is busier. Here, a sidechain alleviates that issue by executing the transaction instantly and reconciling with the mainnet later.
Sidechain enables developers to test new software, or upgrade existing solutions, in a real-world environment. So, even if an app becomes unstable during testing, it does not impact the mainnet deployment. The child-chain experience all the damages during the test.
With a sidechain deployment, network stakeholders need not think about transactions that consume a lot of time. Interestingly, despite having the federation layer and longer confirmation period, it processes transactions much faster.
Sidechain logic can considerably reduce high transaction fees in the mainnet. Instead of recording every move, it parses big data chunks and completes them out of the parent blockchain.
A sidechain can be an appropriate solution for business alliances and consortiums. Mainnet blockchains, having no “know your customer” processes and requiring big investments, can greatly benefit from sidechain projects. Additionally, they ensure enhanced workflow with transparency and a confidential partnership between entities.
We use a sidechain for one specific use case. It means there can be multiple side chains for different tasks while having mainnet blockchain connected, like increasing transactions’ efficiency. In simple words, one application may require to be optimized to increase speed, and others might need optimizations for large computations. Typically, businesses can utilize sidechains in any commercial, blockchain use cases.
Sidechains contain the potential to fundamentally disrupt the space of blockchain and cryptocurrency development. Currently, the blockchain development services with EOS provide the maximum transaction speed due to the use of DPoS (Delegate Proof of Stake) consensus mechanism. Sidechain platforms can give EOS a run for its money. Particularly, it can prove vital for Ethereum blockchain development where apps experience low transaction speed. If we incorporate sharding (Ethereum’s name for sidechains) into the Ethereum platform, it can increase the network’s performance significantly. Blockchain experts also believe that sidechains contain a lot of potential for commercial utilization of blockchain solutions. For instance, legacy banking operations like ownership issuance and tracking can be tested on a sidechain before shifting them onto the mainchains.
Connect with our blockchain experts if you want to understand the know-how of a sidechain implementation for enhanced security, scalability, and efficiency.