Sidechain is a method of blockchain split, where tokens and other digital assets from one blockchain can be safely used on another, additional blockchain. And then, if necessary, go back without any problems.
Advantages and Features
- Freedom of action. Sidechain increases transaction speed, while the user has the opportunity to test and mix cryptocurrencies before making transactions, swap them from the main chain to the sidechain and vice versa.
- Potential for future technologies. Sidechains can be used when testing core software updates on any blockchain-related software.
- There are federations in the sidechain — a group of operators that acts as an intermediate point between the main chain and one of its sidechains (an additional level of control). It is the federation that determines when the user’s tokens can be spent, and when, on the contrary, they are “locked”. The sidechain creators have the right to choose the members of the federation themselves. By the way, this additional layer increases the risks of centralization.
- Security. If the mining power is not enough to provide security, the sidechain can be hacked. But since each sidechain is independent, the damage remains within that chain and will not affect the main blockchain. However, if the latter is compromised, the sidechain will still continue to function. But its connection to the parent chain will be depreciated.
The concept of sidechains was described in the Blockstream development team’s Whitepaper, Enabling Blockchain Innovations with Pegged Sidechains. And in January 2017, Blockstream showed a new Whitepaper of sidechains.