What Is Sidechain?
Also known as: Side Chain, Sidechains
In short
A sidechain is a separate blockchain that runs independently with its own consensus mechanism and validators but is connected to a main blockchain through a two-way bridge, allowing assets to move between the two chains.
The user locks their asset in a bridge contract or address on the main chain; the same amount of a representative asset is created on the sidechain. On the way back, the asset on the sidechain is burned or locked and the lock on the main chain is released. Thanks to this two-way peg, BTC, for example, can be moved to a sidechain for fast payments or smart contracts that Bitcoin does not directly support. Liquid Network and Rootstock for Bitcoin, and Gnosis Chain and Polygon PoS for Ethereum, are frequently cited examples of this model.
Because sidechains are independent of the main chain's rules, they can experiment with different block times, fee structures and features. This flexibility is a way of adding new functionality without changing the main chain.
The key difference between sidechains and rollups is the source of security. Rollups publish their data on the main chain and derive their security from it; sidechains, on the other hand, rely on their own validators. If the sidechain's validators or the parties managing the bridge are compromised, user funds cannot benefit from the main chain's protection. Because bridges have been the target of a significant share of the major attacks in crypto history, bridge security is a matter to be assessed separately.
Last updated: · This content is for information purposes only and is not investment advice.