In the last 12 months, sidechains have changed the dynamics of the crypto industry. One of the primary reasons for their launch was because the main networks of several cryptocurrencies were quite congested and were not working in their best swing.

To cut short, their efficiencies were compromised.

As the name suggests, a sidechain acts as a ‘helping hand’ to the main chain and the integration requires a 2-way peg. As a result, sidechains also enjoy the liberty to issue crypto tokens, depending on the exchange rate.

The purpose is to divide the number of transactions handled on the main chain in order to bring efficiency and increase the capability of the overall network.

How do sidechains work?

It is important to understand that a sidechain does not represent a separate network. In fact, it is an extension of the main chain and is integrated with the root of the main network. For instance, MimbleWimble sidechain can also be integrated with the main BTC network to increase its efficiency.

Let’s take a specific example to understand its working in a better way.

For instance, if you plan to transfer tokens from one wallet to another, it is important to note that they won’t be available on the sidechain by default. In fact, the tokens are programmatically pegged with the main chain and are mobilized to the side chain when required. If you are curious about rate fluctuations while transferring the funds from main to side chain, please note that the algorithm takes into account the exchange rate set between the main and side chains. This is maintained with the help of 2-way peg, as mentioned above.

MimbleWimble

The primary advantage of using this protocol is that it allows efficiency, scalability, and fungibility for the bitcoin network. Unlike most of the ventures, it happens to be one of the most decentralized ones and utilizes an array of futuristic technologies to serve the purpose.

A major perk is that the very protocol facilitates dynamic chain size by removing unnecessary intermediary data, hence optimizing the block size.

In traditional blockchain networks, confidential information is sent to multiple nodes on the network for verification and later on, broadcasted on a public ledger. Therefore, everyone can see these details. But MimbleWimble goes against it and ensures that none other than the concerned parties can see this information. In order to do that, it makes use of the ‘blinding factor’ approach, allowing the encryption of transaction details from any external parties that are irrelevant to the transaction.

Loom Network

If you are a sidechain geek, you must be aware that Loom is not technically a sidechain. It is rather a cluster of sidechains, following the Delegated Proof of Stake protocol. Initially, they rolled out a small version but in the second phase of development, they developed a scaling solution for Ethereum. Basically, the target audience for this 2nd layer scaling is huge because, in 2017 alone, hundreds of ETH based ventures emerged, ranging from gaming to health care use cases. One of the crucial factors to notice is that the network is fully supported by Ethereum’s security.

It should also be noted that Loom happens to be a direct competitor of EOS as its sidechains allow the same functionality in terms of scalability as offered by EOS. But a noticeable perk is that Loom is fully compatible with Ethereum, just like the case of MimbleWimble and BTC.

A couple of months ago, some people also nicknamed it as “EOS on Ethereum”, but considering the latest advancement, I would rather call it “MimbleWimble for Ethereum”.

Liquid

When it comes to brand recognition, Liquid enjoys its monopoly as it has the honor of being the first industry-level sidechain. It is rather a generic implementation which facilitates brokers and exchanges alike.

The Liquid Network proudly markets itself as a fast and secure digital asset transferring platform which extends its support for tokenizes securities and fiat as well.

It is worth noticing that the protocol does not only facilitate organizations. In fact, if a token integrates Liquid with the main chain, even individual users can benefit from its instantaneous transferring speed. Considering how dense the BTC network had become, Liquid offered significant support at the time.

Its technological infrastructure is based upon Elements, an open source tool created by Blockstream and it does not facilitate hashing power and merge-mining.

But unlike Tarush’s implementation of MimbleWimble, which solely runs on community consensus, there is a federation that oversees the Liquid Network and it comprises of several industry giants, including Bitfinex and Bitmax.

POA Network

It happens to be an open source sidechain, particularly developed to facilitate Ethereum. As the name suggests, it utilizes Proof of Authority algorithm for reaching a consensus.

In other words, it an ETH based platform for creating smart contracts and hence, the utility is highly developer-oriented. One of the major advantages is POA Network allows interoperability between an array of blockchain networks, hence allowing the Ethereum network to work in its best swing.

A word…

It is pretty obvious that sidechain implementation is increasing in the industry and the reasons are also understandable. It is a dire need as demanded by the current congestion of the main networks.

The choice of selecting a sidechain depends entirely on the facility you wish to offer, the main chain to peg the sidechain with and the consensus algorithm you decide to choose.

If we put that together and decide to get the best out of Bitcoin network, it is very easy to comprehend that since MimbleWimble allows enhanced scalability, privacy, and fungibility, there is no better competitor. This is the primary reason as to why Tarush has decided to go for the very protocol.