These 3 sidechains hold 9,661 Bitcoins

Not all the Bitcoins in existence reside on the main net

Bitcoin has a fixed supply of 21 million coins that could ever be mined and we just crossed another milestone crossing 18 million BTC. The fixed supply is a big topic of discussion among its supporters and detractors. While the former believe that a finite supply gives BTC the quality as a store of value like gold, the latter claim a periodic halving of block rewards would force out the miners making the blockchain operation more centralized. But this is not going to happen till 2140, so we can leave this debate for a later date.

Recent data from Bitcoin Block Explorer confirms that 9,661 BTC (~$77 million) is locked up in three sidechains — namely Binance Chain, Liquid Sidechain (LBTC) & Wrapped Bitcoin (WBTC). This amount of premier digital coin is therefore not available to be used on the main bitcoin blockchain.

A sidechain solution is one that allows the holders of a digital coin to use a different blockchain with better features & functionality without impacting the working of the main blockchain. A pegging mechanism is utilized to perform transactions to & from the sidechain. Over the years, a few bitcoin sidechain solutions have been proposed & implemented among the three mentioned above, holding 0.054% of the BTC supply currently. Let’s take a brief look at these sidechains.

Binance Chain

The standalone Ethereum competitor from one of the biggest crypto exchanges Binance was unveiled back in April — the platform acted as a place where tokens & blockchain projects could be launched. This was followed up a couple of days later with a preview of additional features being launched with the forthcoming Decentralized Exchange (DEX) as part of its Binancechain project.

The platform uses the BNB coins for transactions. BNB ERC-20 Tokens may seamlessly be converted to Binance Chain native tokens. Binance’s backing has made this the largest sidechain holding 9,001 BTC.

Liquid sidechain

Blockchain startup Blockstream announced this sidechain solution in Oct. 2018 to address the all-important issue of scalability for the Bitcoin blockchain network. The network has its own native token L-BTC (Liquid Bitcoin) which is pegged to the price of Bitcoin with 1:1, which can be readily swapped at any time.

The liquid network works as a second data layer to the existing Bitcoin blockchain where it keeps a copy of the digital records of the main blockchain, with the transactions being executed on the sidechain never occupying any space of the blocks of the main Bitcoin blockchain, thus avoiding any network fees.

The sidechain hosts a modest 89 BTC.

Wrapped bitcoin

Wrapped Bitcoin (WBTC) is also an ERC-20 token designed to use Bitcoin on the Ethereum blockchain with a ratio of 1:1. WBTC can reap the rewards of joining two major networks — for example, integrating the Bitcoin network’s liquidity with Ethereum blockchain’s dApps. The WBTC token offers better usability, increased transaction speeds & greater liquidity.

Debuted in January this year, Wrapped Bitcoin sidechain hosts 571 BTC.

Apart from these three, two other sidechains worth the mention are MimbleWimble — private & scalable sidechain to bitcoin and Rootstock (RSK) —which enables smart contracts like Ethereum for Bitcoin.