Getting to Know Sidechains & Childchains

The phrase scalability trilemma refers to the tradeoffs that developers must make between scalability, network speeds, and security. Fortunately, several innovative solutions are emerging to help resolve this trilemma.  For instance, several blockchains are now implementing sharding and sidechains to tackle the issue of scalability. In this article, we will explain sidechains and their influence on blockchain technology.

How Do Sidechains Work?

Sidechains are a new blockchain architecture designed to help the mainchain scale without sacrificing of security.  In simple terms, let us assume the blockchain is a heavily-trafficked main road. The sidechains are service roads that branch off from the main road at one location and connect back to the main road at another location. These service roads help incoming traffic reach their destination on the main road by foregoing its traffic and congestion. Likewise, sidechains are separate chains that link to the main blockchain at two pegs.  The mainchain’s assets and tokens link to the sidechain’s tokens and assets at a predetermined rate, allowing for exchange at the pegs. In essence, sidechains help enrich the mainchain’s capabilities.

To interact with or use a sidechain, a user on the mainchain has to send his or her tokens to an output address. After being sent,  they’re locked for a predefined amount of time and cannot be used elsewhere (which ensures security). Meanwhile, transaction details travel along the mainchain and sidechain. When the waiting period is over, the sidechain releases a corresponding amount of tokens, thus allowing the user to spend tokens on the sidechain.

The Technology Behind Sidechains

A cluster of servers function as an intermediate mediator between the mainchain and the sidechain. This cluster of servers is known as a federation. The federation determines when the sent tokens are locked up and for how long. The sidechain’s developers select the participants of the federation, including which servers form the federation. Unfortunately, using federations adds an additional layer between the sidechain and the mainchain.

Advantages of Sidechains

Sidechains have two main advantages. The first advantage is that they’re permanent, meaning that one doesn’t have to create a new sidechain every time a need exists. And once a sidechain is created, it can be used by anyone working with the mainchain.  Sidechains also enable interaction across different cryptocurrencies. And they allow developers to test software upgrades as well as beta-token issuances before issuing them to the mainchain.

Disadvantages of Sidechains

Since sidechains are responsible for their own security, they must have enough mining power to ensure protection. Moreover, miners are required to make sure that all other sidechains are secure as well. This process makes the creation of new sidechains costly. And while sidechains may be impervious to any mainchain hack, the value of the pegs and the underlying conversion rate will suffer if hacking occurs.

How Childchains Are Different

Although developers sometimes refer to sidechains as childchains, a subtle difference appears to be emerging. In the Ardor platform, a childchain refers to a sidechain tightly integrated into the mainchain.  Unlike sidechains, childchain transactions are validated by all the mainchain nodes. As a result, security is not solely dependent on the childchain (as the mainchain secures the blocks). And if desired, only the latest childchain transaction need be validated, thus improving overall scalability.  

It remains to be seen, however, if cryptocurrency outfits will implement additional childchains (as defined above).

Notable Sidechains 

The number of projects deploying sidechains appears to be expanding rapidly. Below are three notable projects that deploy sidechains.

Ethereum Plasma

Although still in development, Plasma is perhaps the best-known sidechain around.  It’s expected to dramatically boost Ethereum’s scalability, a crucial component to Ethereum’s survival. As Investopedia states,

“Plasma will get rid of unnecessary data in the root chain. It will handle smart contracts much like its foundation, but will only broadcast completed transactions to the public Ethereum chain. This saves an enormous amount of processing power and memory for the chain’s participants, making it more inexpensive to interact with the system’s other participants. It will also speed up transactions enough to let decentralized apps run without worrying about backlog.”

Rootstock

Bitcoin lacks smart contract abilities, a significant disadvantage to the coin’s growth. Rootstock, an open source smart contract project with a two-way peg to Bitcoin, adds value and functionality to the Bitcoin network by enabling near-instant payments, higher scalability, and smart contracts. Since the Rootstock sidechain does not have any coins of its own, investors do not view it as a Bitcoin competitor. It is important to note that the sidechain’s security is at the same level as that of Bitcoin. 

Liquid

Liquid helps to facilitate instant transfers of funds between crypto-exchanges without having to wait for the delay associated with confirmations in the Bitcoin Blockchain.

MimbleWimble

MimbleWimble is a private and scalable alternative to the current version of the bitcoin blockchain.

Conclusion

Sidechains form a supplemental network that executes several complementary functions, thus enabling faster transactions, lower transaction costs, and greater scalability (the number of transactions that can be successfully handled by a network at a given time). In the end, sidechains prevent blockchain technology from quickly becoming obsolete.