Clear DefinitionsSidechain
1 min read
Pronunciation
[sahyd-cheyn]
Analogy
Imagine a main city (Layer 1) with its own currency. A sidechain is like a neighboring autonomous town that uses a special bridge (the two-way peg) to let people convert the city's currency into the town's local currency to use within the town, and then convert it back when they return to the city. The town has its own mayor and police force (consensus and security), which might be different from the main city's.
Definition
A separate blockchain that is pegged to a main Layer 1 blockchain (the 'mainchain') through a two-way peg mechanism, allowing assets to be transferred between them. Sidechains have their own independent consensus mechanism and security properties.
Key Points Intro
Sidechains provide a way to extend a blockchain's functionality and scale by running parallel chains with independent security.
Key Points
A separate blockchain network linked to a mainchain via a two-way peg.
Assets can be moved from the mainchain to the sidechain, and back.
Has its own consensus algorithm, block parameters, and security model, which may differ from the mainchain.
Can be used for experimentation, specific applications, or to offload transactions from the mainchain.
Example
Polygon PoS is often described as a sidechain to Ethereum, using its own set of validators and consensus (Proof of Stake) while allowing assets to be bridged from and to Ethereum. Liquid Network is a Bitcoin sidechain designed for faster, more confidential transactions between exchanges and traders.
Technical Deep Dive
The two-way peg mechanism is crucial for sidechains. To move assets from the mainchain to the sidechain, assets are typically 'locked' on the mainchain, and an equivalent amount is 'released' or minted on the sidechain. To move them back, assets are burned or locked on the sidechain, and the original assets are unlocked on the mainchain. The security of this peg (e.g., who controls the locked assets) is a critical aspect. Unlike Layer 2 solutions like rollups, sidechains do not directly inherit the full security of the mainchain; users trust the sidechain's own validators and consensus.
Security Warning
The security of a sidechain is independent of the mainchain. If the sidechain's consensus is compromised (e.g., through a 51% attack on its validators), assets on the sidechain could be at risk. The security of the bridge mechanism is also paramount.
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