Said to be solving a problem as old as cryptocurrencies itself, sidechains have been around for a while. Having as many prominent proponents as potential use cases, they are promising to be a praiseworthy candidate to solve the scaling problem plenty of blockchains are currently facing.

What are sidechains?

Sidechains are emerging mechanisms that allow tokens and other digital assets from one blockchain to be securely used in a separate blockchain and then be moved back to the original blockchain if needed. -Shaan Ray

So, a sidechain is a seperate blockchain attached to another blockchain, often referred to as the mainchain. They are attached to each other using a two-way peg. This means the assets on the mainchain and the sidechain can be traded at a predetermined rate.

In order to trade assets from the mainchain for assets from the sidechain, one would first need to send their assets on the mainchain to a certain address, effectively locking the assets up. After the transaction has been completed, a confirmation will be communicated to the sidechain. The sidechain will then release a certain amount of the assets on the sidechain to the user, equivalent to the amount of assets ‘locked up’ on the mainchain times the exchange rate. To trade the assets from the sidechain for assets of the mainchain, one would need to do the same, just the other way around.

Sidechains need their own miners/block producers, so each sidechain is independent. If a sidechain fails or gets compromised, the mainchain can still continue operating. If the mainchain gets compromised, the sidechain can still continue operating too, although the second scenario is most likely catastrophic for the sidechain.

The possibilities of sidechains

Sidechains are without a doubt very promising, and if everything works out, they might just be the future of blockchains.

E fficient inter blockchain communication is key to scalability and protocol evolution. One token can easily migrate from one generation chain to the next as we learn how to scale. Current and future generations can run side by side. -Daniel Larimer

But what exactly are the possibilities of sidechains, and how can they solve some of the major problems many blockchains are currently facing?

First and foremost sidechains allow new and potentially unstable software to get deployed and tested on a sidechain. If the software causes harm to the blockchain, the damage is contained within the sidechain. Faulty software and major bugs can lead to terrible situations, which we have seen happen quite often in the past.

Another promise of sidechains is the ability to have a stronger and faster mainchain, as transactions can happen on one of the sidechains. If users or developers are dissatisfied with the costs of sending a transaction and the transaction speed of the mainchain, they can use and or deploy their dapp on one of the sidechains. This leads to a more diversified network and a stronger, faster and more robust mainchain.

Since sidechains are able to take some pressure off the mainchain, they are also able to help solve the ancient blockchain scaling problem. Sidechains could store data and process transactions, maintaining the integrity of the mainchain while making it smaller and faster.

That is however not all. Sidechains also have some specific use cases, unique to a certain blockchain. One example is the usage of sidechains in EOS. EOS is currently facing a RAM problem. RAM is too expensive and developers are complaining. Sidechains could compete with the EOS mainchain by having lower RAM prices, this would lead to competition, incentivizing both the EOS mainchain block producers and sidechain block producers (mainchain and sidechains of EOS are maintained by the same group of block producers) to keep the RAM price as low as possible. This also means there is more RAM available, so the RAM price will go down as a result.

The cons of sidechains

Sidechains solve a lot of problems, but at what cost? The introduction of sidechains makes things even more complex and much harder to understand for those who are not actively involved in the blockchain space. This also divides assets, no more “one chain, one asset” adage, which further complicates things. And on a network level there are multiple independent unsynchronised blockchains interacting with each other.

Since these sidechains will have to support themselves, they could be an easy target for a sophisticated attack. Possibly even a 51%-attack (a scenario where a single entity has control over more than 50% of the hash power in a blockchain, giving them control of the chain)

Lastly, the introduction of sidechains raises another question. What happens if a sidechain gets compromised/fails? Will the assets on that sidechain get lost? Will the chain get rolled back, possibly messing with the interchangeability of the tokens? Will tokens automatically get traded for the token of the mainchain?

And how will the possibly failure of a sidechain effect the mainchain and its reputation?

Conclusion

All things considered, sidechains look very promising and are, if correctly implemented, capable of solving some of the problems blockchains are currently facing. If the above concerns get addressed, sidechains are without a doubt here to stay.

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Written by Yannick Slenter for Blockgenic