What Is a Sidechain?
A sidechain is a separate blockchain that runs in parallel to Bitcoin's main chain (mainchain), connected through a two-way peg that allows bitcoin to be transferred between chains. Sidechains enable new features and experimentation without affecting Bitcoin's core protocol.
Two-Way Peg
Bitcoin can be moved to a sidechain by locking it on the mainchain and creating equivalent tokens on the sidechain. When moving back, the sidechain tokens are destroyed and the mainchain bitcoin is unlocked, maintaining a 1:1 correspondence.
Benefits & Use Cases
Innovation Without Risk
Sidechains can experiment with new features like faster confirmations, enhanced privacy, or smart contracts without risking the security or stability of Bitcoin's main network.
Scalability Solutions
By processing transactions off the main chain, sidechains can help scale Bitcoin without increasing the burden on the primary blockchain. The Lightning Network is a similar Layer 2 solution.
While sidechains offer exciting possibilities, they typically require their own security mechanisms separate from Bitcoin's proof-of-work. Understanding the trade-offs between sidechains and the main chain is important for evaluating their suitability for different use cases.
Quick Facts
- •Enables experimentation without main chain risk
- •Examples: Liquid, Rootstock (RSK)
- •Bitcoin can be moved between chains