Sidechains

Horizen Official
Jul 3 · 4 min read

A sidechain is a blockchain in and of itself with the added feature of being interoperable with the main blockchain. Transactions are the most common interaction with a blockchain facilitating a cryptocurrency, such as our current Horizen blockchain. The Engineering team at Horizen, led by Alberto Garoffolo, has proposed a sidechain construction based on proof-of-stake principles. The main innovation is a new backward transfer protocol that allows transactions from one of the possibly many sidechains back to the mainchain, without the mainchain having to track the sidechain and without introducing a centralized federation of validators. While a reference implementation of a sidechain consensus protocol will be provided, a wide range of sidechain consensus protocols will be possible.

Sidechains are a concept that people have been looking into for a while now. The first proposal of sidechains was developed by Back et al. in 2014 and several teams are working to implement them as a solution to the problems of scalability and interoperability.

What is a Sidechain and Why Would You Want One?

When Back et al. introduced the sidechain concept in 2014, they provided the following definition along with it:

“A sidechain is a blockchain that validates data from other blockchains. […] A pegged sidechain is a sidechain whose assets can be imported from and returned to other chains; that is, a sidechain that supports two-way pegged assets.” A. Back et al. — Enabling blockchain innovations with pegged sidechains, 2014

In other words, a sidechain is a blockchain that can communicate and interoperate with one or more other chains. When you hear the term sidechain today, people are mostly talking about pegged sidechains, which allow you to transfer assets back and forth between chains.

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So What is the Benefit of This Technology?

Most blockchains facilitating cryptocurrencies use the proof-of-work consensus algorithm and have incorporated the core functionalities of the Bitcoin protocol. Therefore, they inherited a lot of the constraints from the code created by Satoshi Nakamoto. This includes limited throughput, high latency, and a limited ability to scale. Sidechains present an option to help overcome some of these technological shortcomings, but besides opening doors to only potential technical leaps, they also touch on the topic of governance.

As debates across the recent years have shown, making changes to the codebase in decentralized projects tends to be a cumbersome process. This is arguably a feature, not a bug. Stability (not in regards to token price, but code) is crucial, especially for projects such as Bitcoin, and the overall security of the protocol benefits greatly from the careful consideration of every change applied to the system.

Sidechains offer a mechanism to implement features on top of a first layer protocol without compromising the security or stability of said protocol. After an initial fork that includes the capability to deploy sidechains and introduces a way to transfer assets from the mainchain to the sidechain and vice versa, a number of parallel chains can be built, each serving a different purpose, without having to build consensus for each individual feature.

It is important to note that the initial change to the codebase enabling the deployment of sidechains and cross-chain transfers has to be done carefully and possible solutions should be evaluated with great caution. If a project manages to deploy those features, then developers can start playing around, and build on top of projects where changes to the protocol traditionally required consensus building for months or even years. Ideally, the sidechain implementation will give developers on the sidechain many degrees of freedom while eliminating the possibility to compromise mainchain security. If a user has no need to use a particular sidechain, he doesn’t have to care about the security of those sidechains.

What Can You Do with a Sidechain?

As we said earlier, many teams are looking into the technology of sidechains for a variety of purposes. The team behind Rootstock is working on a way to provide smart-contract functionality on top of Bitcoin. They refer to their sidechains as secondary chains. Polkadot, naming its sidechains Parachains, aims to connect permissioned and public blockchains. The general idea of Plasma is also based on sidechains or child blockchains and here the main goal is scaling. Drivechains are meant to enable BTC to be moved to other software applications, like different public blockchains.

You could make a case of distinguishing between sidechains and drivechains as discussed in this paper by Rootstock. We will pick up on their distinction shortly when talking about how sidechains work.

The general idea is the same, though, and satisfies the broad definition of a pegged sidechain that Back et al. provided about four years ago.

Critics of the sidechain concept like to point out that most sidechain implementations currently rely on a set of validators to facilitate cross-chain transactions. Sidechain constructions are oftentimes called trust-minimized instead of trustless. The risk comes down to the ability of the trusted validators to censor transactions from main- to sidechain and vice versa. Our protocol addresses this issue in an elegant way.

Read the full article on the Horizen Academy!


Originally published at https://academy.horizen.global.

Horizen Official

Written by

Horizen is an inclusive ecosystem built on its massively scalable blockchain platform where everyone is empowered and rewarded for their contributions.

Horizen

Horizen

Horizen is an inclusive ecosystem built on its massively scalable blockchain platform where everyone is empowered and rewarded for their contributions.

Horizen Official

Written by

Horizen is an inclusive ecosystem built on its massively scalable blockchain platform where everyone is empowered and rewarded for their contributions.

Horizen

Horizen

Horizen is an inclusive ecosystem built on its massively scalable blockchain platform where everyone is empowered and rewarded for their contributions.

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