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Lumi Wallet Blog

What is a Sidechain

And What It Means for Crypto Games and Dapps

Before we start with the brave new world of sidechains, let’s recall what the most vital problem of blockchain is. And no, we’re not talking about the recent market crash anymore, we’re bringing up the scalability issue. We’ve all heard of it but let’s be honest: unless you are a miner, developer, or involved in a crypto startup, you can’t be bothered too much. Or can you?

Just ask yourself one question.

How does scalability affect me as a gamer and a regular dApp user?

The iconic example of CryptoKitties’ proved that Ethereum blockchain was not prepared for such enormous popularity, and that mass adoption is technically not even possible (for now). What happened when the number of transactions increased significantly? The network was defeated and that, later on, became a famous showcase for the flaws of the network.

Let’s dig deeper and try to find the root of the problem.

Imagine you’re playing a blockchain board game with your friend. Every single time you make a move, you send a transaction that changes the state of the game and the same happens to your friend as well. Every time you have to pay a certain transaction fee and wait until the miners confirm it. Bear in mind that the whole blockchain needs to be updated because of your single move in the game.

That doesn’t sound effortless enough for a new groundbreaking technology.

But what if there was a special place where you and your friend could play and finish your game without the need to report your actions to the main blockchain every time? For instance, you can make a move, pass the info to your friend and he confirms the accuracy of your actions by signing it himself. And then he goes through the same process and now it’s your turn to sign. This continues until the game is finished and one of you sends the final result to the blockchain claiming their victory.

Just one transaction to rule them all.

The second party then can check if the report was sent correct and that the other player didn’t compromise any information. In the case that they did, you can always prove your point by showing the gameplay data signed by both of you. No cheating, just a fair game, and one single transaction.

It’s high time we introduced sidechains to you because that’s pretty much how they work.

What Are Sidechains

A sidechain is a separate chain that is attached to the main blockchain using a two-way peg. This two-way peg is a kind of dam between two chains that controls the speed of sharing assets and makes the assets interchangeable. When you send your assets to the main chain, they are first being sent to the output address, locked there for a while so you won’t be able to use them, and after the transaction is confirmed you go through an extra waiting period. That’s when you can claim your victory if your opponent has cheated when sending the final report to the parent blockchain. And all the way around: while sending your funds to the sidechain, you still have to go through this process for better security.


Sidechains have federations that act as intermediaries between them and the main chain. Federations are a group that makes those final decisions on when the assets are being released and how long they should be locked up. However, not everyone’s excited about the presence of federations in sidechains’ system. They are often criticized as a target for attackers that can be corrupted or easily attacked. Not to mention, they add another extra layer between the chains.


Sidechains need their own miners and are responsible for their own security. On the bright side, the transactions that are going on on the sidechains are usually small and aren’t extremely important so there is not that much of an interest in hacking them. The execution of smaller transactions should be treated differently, they don’t need the same level of security as million-dollar transactions. Plus, if the sidechain is hacked, it won’t affect the main chain.


Sidechains are everlasting and universal. Since you’ve created one sidechain you don’t need to create another one every time you need it for slightly different purposes. Let’s say you want to try to execute some altcoin transactions off the main chain. You can easily do it on the existing sidechain, besides, the number of participants is not limited. Sidechains actually allow cryptocurrencies to interact with each other.

Then how come sidechains are not everywhere by now?

Currently, building a sidechain is a hard and expensive work and requires a lot of mining power. And they also need to be maintained afterward. Unfortunately, these arguments are still quite strong. But of course, there are projects that come to rescue.

Loom Network is a great solution for game creators that want to upscale but cannot do it because of the blockchain’s scalability and also for social dapp creators that want to avoid annoying advertisements and choose to be monetized the other way by using karma tokens and other similar tools. In order to that, Loom suggested creating DappChains (Ethereum sidechains) for developers to use as their own and simply pay a ‘rental fee’.

The company first announced a launch of their ready-made “shared sidechain” called ZombieChain that can be used by dapp developers in exchange for a monthly fee. However, later on, the team decided to improve and update this idea and that’s how PlasmaChain for “faster and cheaper transactions without ever touching the mainnet” came to life.

Loom has been busy working on a few SDK projects as well, and has created ‘Axie Infinity — Collect’ to add advanced functionality to the game.

The Bottom Line

While exploring the possibilities of sidechains, we can be sure that they (together with other scaling solutions) can contribute to solving the blockchain scalability problem and allow developers to create prime-quality games and dapps by taking the transaction procedure off of the main chain and significantly improving the user experience.

Was it Helpful?

Blockchain can sound confusing in the beginning, but we’re determined to make complicated things sound easy for everyone. Follow Lumi’s Twitter, Facebook, and Reddit, and we will share with you a lot more. Have a question or a suggestion on your mind? Speak up on our Telegram public chat.

Never stop learning!



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