Appchains And Sidechains To Solve Blockchain Problems
A few years after the launch, the Bitcoin network, as well as Ethereum, faced two major problems.
One was low transaction processing speed and the other were new crypto projects that offered high speed and low transaction fees. Developers came up with a solution for Bitcoin, they invented the technology of sidechains and appchains. The most simple way to understand it is to use the train analogy.
So, each train, like a block of the network, has a limited number of seats. To receive a ticket, passengers must place a certain bid to reserve a seat. If everyone tries to board the same train at the same time, the price per seat will skyrocket. The same applies to network transactions that are waiting for their turn to be executed. In this case, users are required to pay a higher fee in order to convert or buy crypto, for example.
Continuing the train theme, one of the optimal solutions would be to increase the size of trains (blocks). This will mean more seats, higher capacity and reduced ticket prices. That is exactly what developers of Monero (XMR) did. They gave permission to change the size of blocks. If a number of requested cryptocurrency transactions becomes too big, Monero miners can increase the maximum block size. According to our train comparison, imagine adding more wagons to the train, allowing it to get more passengers (tokens). But there is no guarantee that places won’t start filling up once again. Trains cannot be constantly expanded, just like blocks. This makes node maintenance even more expensive, as their owners will need more expensive hardware.
The use of sidechain and appchain technology allows to increase the speed of transactions and reduce their cost by creating a separate, additional blockchain, which at the same time will have a link to the main network with the ability to freely move assets from one chain to another.
Appchain is a blockchain that proposes space to blocks for a specific application. This technology gives developers more freedom in development of ecosystems, governance structures and consensus algorithms for the decentralized applications.
There are main two benefits of appchain technologies:
- Productivity. Decentralized applications compete with each other for block space on the same network. It often happens that one popular dApp consumes a big amount of resources, which increases the overall transaction costs and slows down the processing speed of other dApps in the network. Appchain gives crypto projects the ability to keep transaction costs low and processing speed at an optimal level.
- Flexibility. As dApps grow in popularity, developers need to optimize their applications for users. Different applications have their own unique technical characteristics and level of complexity. Appchain technologies can easily adapt to any changes, which helps to reduce the number of errors during the update process.
Also, there are two core disadvantages:
- Limitation. Appchains are made for one specific application. Technically they are not able to interact with other DApps. The problem can be solved by integrating cross-chain bridges, but the latter are often a target for hackers.
- Financial risks. If the application is not popular enough, then launching and maintaining the appchain can be a waste of time and money.
Some blockchain projects provide developers with the ability to create appchains. Such as Polkadot parachains (DOT); Cosmos Zones (ATOM); Avalanche subnets (AVAX); Polygon Supernets (MATIC).
Sidechain is a scaling blockchain technology that is implemented by creating a parallel network with two-way binding to the main one. This is a separate blockchain, but not autonomous, as it has some connection to the main chain — assets can freely move from one chain to another.
Imagine that you have one Bitcoin. And you want to swap BTC for equivalent assets on the Bitcoin sidechain (sidecoins). To exchange it, you need to send your BTC to another address and then receive your sidecoins with the same value. It’s just an example — on sidechain you have the opportunity to freely perform any possible operations. But why should we do that, when we could just use the main Bitcoin blockchain? Because sidechain can do something that Bitcoin cannot.
- Speed. For example, a sidechain based on Bitcoin called Liquid Network, allows to reduce the block creation time from 10 minutes to 1 minute. This makes it possible to process transactions faster.
- Development. Sidechains can work without affecting the main chain. This makes it possible to use them as platforms for conducting various experiments and deploying new features that would otherwise require consensus from the majority of network participants.
- Security. In case of hacking, the damage remains only within the affected chain. If the main blockchain is hacked, the sidechain will continue to work, but its link to the main chain will be cut loose.
Today, Bitcoin and Ethereum, two of the most popular projects in the crypto industry, use sidechain technology.
The use of sidechains and appchains significantly expands the capabilities of cryptocurrency networks, increases their speed and allows to cope with the problem of scaling. These technologies are new, and it’s still developing. And implementing fresh ideas to the Crypto Word might improve the efficiency of working with cryptocurrency in general.
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