What Is A Sidechain In Blockchain And How Does It Work?

Learn about the Sidechain that Blockchain networks use to solve major issues, including scalability, flexibility, and interoperability. 

Story highlights –

– A Sidechain helps blockchain networks in boosting their scalability and interoperability.
– Assets are transferred securely with two-way peg and smart contracts.
– Advanced security measures are used to protect the assets.

Scalability, flexibility, and interoperability are the issues plaguing most major blockchain networks. For example, blockchains like Bitcoin and Ethereum have a lot of transactions, which slows down the network. A sidechain has been created to address those issues. They help Blockchain networks by increasing scalability and interoperability. In this blog, you learn what a sidechain is and how it operates.

What is a Sidechain? 

A sidechain is a separate network that connects to another Blockchain with the help of a mechanism known as the two-way peg. Assets can be transferred from one chain to another with the help of a sidechain.

A Sidechain is also called the sibling Blockchain or side Blockchain, helping increase the security and scalability of the parent Blockchain or the main Blockchain.

Source: trustmachines.com

How Does a Sidechain Operate? 

The following steps reveal the operating procedure of a Sidechain:

– Mainchain transaction: The user has to lock assets like crypto coins or tokens on the mainchain to initiate the transaction.

– Pegging protocol: The pegging protocol then checks the assets locked in the main chain.

– Sidechain generation: The pegging protocol helps to create a corresponding amount of assets on the sidechain, which is pegged to mainchain assets. 

– Sidechain Transaction: The assets created on the sidechain, which are separate from the mainchain, can be transferred by the users.

– Sidechain validation: To ensure Sidechains are integrated, nodes or validators check Sidechain transactions.

– Cross-chain bridge: Users can use the cross-chain bridge to transfer their assets back to the main chain. A cross-chain bridge can communicate with both involved blockchain networks.

– Unpegging protocol: Unpegging protocols check the assets transferred to the Sidechain and open the corresponding assets on the mainchain.

– Mainchain transaction – The assets are now available on the mainchain, and users can access and use them.

It helps to bring scalability and flexibility to transactions and transfers of assets securely between different Blockchains.

Security Measures in a Sidechain 

A Sidechain uses additional security measures, such as cryptographic technology and auditing procedures, to provide the utmost safety:

– Cryptographic techniques – It uses the inscription method to protect the data and assets while transferring it, zero-knowledge proofs are used for privacy-protected transactions, and homorophic inscriptions are used for figuring out encrypted data.
– Auditing protocols – Continuous auditing and security tests ensure that sidechains are integrated. Decentralized oracles are used to secure data feeds on smart contracts.

Key Components of a Sidechain 

– Two-way-peg: It transfers assets or data securely between the Mainchain and the sidechain. It makes sure that Sidechains are integrated. Two-way-peg gives security for the transaction.
– Smart contracts: Smart contracts help lock and unlock assets. It helps to transfer the assets securely. Smart contracts provide efficiency, security, and decentralization to the Sidechain ecosystem.

Thus, sidechains provide solutions for problems like scalability, security, and interoperability. Sidechains allow transactions between mainchain and Sidechains, which increases scalability and interoperability. A Sidechain is an essential innovation for blockchain development.

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only and do not establish financial, investment, or other advice. Investing in or trading crypto or stock comes with a risk of financial loss.

Nancy J. Allen

Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.