People who have been around Bitcoin or the crypto space for a while must have acknowledged some of the shortcomings that hinder Bitcoin from development. Indeed, if you have noticed carefully, no tokens have ever been issued on the Bitcoin blockchain network. That is because the scripting language for Bitcoin is not Turning complete, thus, it does not support applications to be built on top of it. Wait a minute, Bitcoin was not designed in that way back in 2009 when it was created by Satoshi, was it? Right, Bitcoin’s primary mission was to be used as a peer-to-peer trust-free electronic cash. But obviously Bitcoin hardly achieves that goal, at least not this stage of its development, due to high transaction fees, long confirmation time and a bunch of other issues. Anyway, the programming language for Ethereum — solidity, is a Turning complete language which allows smart contracts to be coded and executed. Because of that, Ethereum got so hyped in 2017 and the price of ether grew exponentially. Followed by many developers who dived themselves into construction of smart-contract enabling platform such as NEO, Qutm and so many others.
The founder of Ethereum, Vitalik Buterin, who has been involved in the Bitcoin community in his early career before Ethereum was founded, said during an interview that the Bitcoin community thinks that Bitcoin is 80% complete while the Ethereum community believes that Ethereum is only 30% complete. That may be a biased statement, but we do see a lot of upcoming excitements surrounding Ethereum. Casper, Raiden, just to name a few.
The percentage comparison might leave an impression that the sky is unlimited for Ethereum while the possibility with Bitcoin world is limited. Well, give some credits to the great Satoshi Nakamoto, Bitcoin came pretty handy already when it was given “birth”. It’s just that as the technology evolves, people have lifted up their expectations and wish Bitcoin to do this and achieve that. But it is just not that simple. In fact, much effort from the community and beyond has been made to make adjustments and improvements on and around Bitcoin. Sidechains are among those efforts.
A sidechain is essentially a blockchain that pegs to a main chain (mostly Bitcoin or Ethereum), in a “parent-child” relationship, therefore, sidechain is often referred to as child chain and the blockchain which it attaches to is called the parent chain. Sidechains can be scalable and highly flexible blockchains that aim to enhance the parent chain significantly. For example, the Bitcoin blockchain is unable to scale, its block interval is long, and it is not as flexible as Ethereum. By incorporating various sidechains to the Bitcoin network, we would actually see Bitcoins doing a bunch of different things that we wouldn’t see otherwise. So how does it work?
Normally, A sidechain communicates with the main chain in a two-way peg. A two-way peg is a channel where digital assets are able to be transferred back and forth. For instance, a batch of bitcoins can be sent by a user to the sidechain from Bitcoin main chain to do various things, and be transferred back. Rootstock is a prominent sidechain to Bitcoin network, it is equipped with a Turning Complete Virtual Machine which allows smart-contracts to be in place. Rootstock is also promised to bring more on the table, it has a relatively higher transacting speed, up to 300 tps, also, it has a very short block interval 10s as compared to Ethereum’s 12s. When the Bitcoins arrived in Rootstock platform, they became Rootstock’s native currency — Rootcoins (RTC) and RTC is equivalent to BTC in value and can be freely transferred back at any time (Two-way peg). The Bitcoins in Rootstock platform (RTC) therefore can do a lot of things as promised, for instance, it can be interactive with other smart contracts and also be transacted faster and so on.
In a nutshell, a sidechain of Bitcoin like the Rootstock is designed to enable Bitcoin smart-contract capability and faster in payment. Nevertheless, Rootstock has a intrinsic flaw — it requires its own miners to maintain its security. We all know that Bitcoin network is arguably the most secure blockchain network, but sidechains are not able to make a “free ride” of Bitcoin’s impeccable hashpower. Therefore, a different group of miners are incentivized to maintain the security of the sidechain, which made sidechains costly.
Security means cost in the blockchain world, not necessarily proportionally but definitely positively correlated. A massive utility consumption is in place to secure all kinds of blockchain networks — the sacrifice comes after being decentralization, painful but inevitable. It is estimated that security resources burned altogether in 2020 will be the same as a medium-sized country. The main cause for this to happen is that blockchains are mutually exclusive, the security resources are not shared. To illustrate, the miners in the Bitcoin network is not mining to secure the Litecoin network and vice verse. Is there a way to share security resources while not losing other key features? The answer is parallel chain or parachain in short.
Well, the concept of parachain is relatively new, 3 key words you should know about parachain: scalable, efficient and secure. A parachain can process transactions independently, which makes the network highly scalable when the number of parachains goes up, very similar to state channels such as the lightning network. And parachain is incorporated with state machine, empowering efficient and flexible applications. More importantly, the security of each parachain is supplied by the main chain, in other words, the security of the main chain guarantees the well-being of the parachains. Nonetheless, as the number of parachains grows, the magnitude of the security in the whole network levels up as well. Because each parachain will have a few number of nodes deployed, the security level increases proportionally to the total number of nodes running in the network.
Polkadot is a project promises to bring parachain in live next year. Another two projects have parachain up and running already: Yuan Chain and Bityuan.
The parachain brought by Yuan Chain and Bityuan is designated to realize blockchain commercialization for as many industries as possible. It is generally believed that blockchain technology has a tremendous potential to reshape every industry in our life, more or less. Every industry needs to have at least one parachain deployed to make the transition. The smart-contract embedded parachain is highly scalable and decentralized applications can be built on it. It also enables interoperability between parachain to parachain and parachains to the main chain, cross-chain trading is viable between the parachains and values are easily transferred.
A consortium of parachains by the main chain looks indeed more powerful than a single sidechain attached to the main chain. It is also featured with many forward-looking functionalities: smart-contracts, interoperability, cross-chain trading and security sharing. As promising as the parachain may seem to be, it is quite a long-term ecosystem.
