Sidechain

What Is a Sidechain? 

A Sidechain is an independent blockchain that runs alongside a main blockchain (Layer 1). Using a two-way bridge, crypto assets and data can move between the two seamlessly. Sidechains are designed to reduce congestion, lower transaction costs, and support specialized use cases without adding strain to the main chain. 

For a deeper dive, visit What Are Sidechains?. 

How Sidechains Work 

1. Two-Way Bridge 

A two-way bridge ensures 

crypto can move securely between the main blockchain and the sidechain. Digital assets are first locked on the main chain, and equivalent tokens are created on the sidechain, allowing seamless transactions. This locking mechanism ensures there is no duplication of assets, maintaining trust and security between the two chains. 

2. Independent Validation 

Sidechains function independently, using their own consensus mechanisms, such as Proof of Stake or Delegated Proof of Stake. This independence allows sidechains to operate efficiently and implement custom rules or features without relying on the main chain's validation system. This separation reduces congestion on the main chain and enhances scalability. 

3. Interoperability 

Sidechains are designed for interoperability, meaning crypto assets and data can move freely between the main chain and the sidechain. This flexibility allows developers to test new features and create specialized environments while maintaining a connection to the main chain. For users, it provides the ability to leverage the advantages of both chains, such as faster transactions or lower fees on the sidechain while still benefiting from the security of the main chain.

Use Cases of Sidechains 

1. Boosting Scalability 

Sidechains significantly enhance scalability by processing transactions off the main blockchain. This reduces congestion on the primary network, enabling faster transaction speeds and improving the overall efficiency of the system. This is especially useful during peak usage times when the main chain might otherwise face delays or bottlenecks. 

2. Custom Features 

With sidechains, developers can create blockchains tailored to specific use cases. These custom features and rules make sidechains ideal for industries like gaming, where unique in-game economies can be built, supply chain solutions for transparent tracking, or DeFi protocols with specialized financial contracts. This flexibility empowers businesses and developers to innovate without restrictions. 

3. Lower Costs 

Transactions processed on sidechains are generally much more affordable compared to those on the main blockchain. This is because the main chain often comes with higher fees due to congestion and demand. Sidechains, by handling transactions separately, reduce these costs, making them an attractive option for applications requiring frequent or micro-transactions, such as payment systems or decentralized apps. 

4. Testing and Experimentation 

Sidechains provide a controlled environment for developers to test new features or launch experimental projects. By isolating the testing process from the main chain, developers can innovate freely without compromising the security or stability of the primary blockchain. This is particularly valuable for ensuring updates or new protocols are ready for large-scale deployment.

Sidechains vs. Rollups 

Though both sidechains and rollups aim to improve blockchain scalability, they differ significantly in how they achieve it: 

• Sidechains: Operate independently with their own validators and consensus mechanisms, meaning they don’t rely on the main chain for security. Sidechains offer flexibility, allowing for custom design choices, but their security depends entirely on the sidechain's validators rather than the main chain. This makes them better suited for specific use cases like low-cost or high-speed transactions. 

• Rollups: Rely on the security of the main chain by using validity proofs (ZK-rollups) or fraud proofs (Optimistic Rollups). Rollups process transactions off-chain and then bundle them into batches to be verified on the main chain, maintaining a balance between scalability and security. This makes them ideal for use cases requiring trustless execution while benefiting from the underlying blockchain’s security. 

Examples of Sidechains 

• Polygon (formerly Matic): A trusted and highly popular Ethereum sidechain designed for fast, low-cost transactions. It supports a variety of dApps and has gained significant adoption in the DeFi and NFT spaces. 

• xDAI: A sidechain focused on stablecoins, making it ideal for use cases like microtransactions, payments, and cross-border transactions due to its stable currency and affordability. 

• Liquid Network: A Bitcoin sidechain optimized for faster, more private transactions. It is often used by traders for transferring large amounts of Bitcoin quickly and securely without relying on the Bitcoin main chain's longer transaction times.

Sidechains and Ulys 

Ulys makes blockchain interactions simple by handling sidechain transactions seamlessly, so users don’t have to switch between chains manually. With Ulys, you can enjoy lower costs and faster processing times, all without needing specialized technical knowledge.

Disclaimer: Nothing in this entry is intended to be professional advice, including without limitation, financial, investment, legal or tax advice. Ulys is not responsible for your use of or reliance on any information in this entry as it is provided solely for educational purposes. Purchasing crypto assets carries a high level of risk, including price volatility, regulatory changes, and cyber attacks. On-chain transactions are irreversible once confirmed, and errors may result in permanent loss. Please make sure to do your own research and make decisions based on your unique circumstances. Ulys does not itself provide financial services or engage in regulated activities such as money transmission, custodial services, securities brokerage, or lending. Any licensed financial services (e.g., payment processing, crypto-to-fiat transactions, or lending) are facilitated entirely by third-party providers, who are responsible for obtaining and maintaining the necessary licenses under applicable U.S. federal and state laws. 

Risk Disclosure: Crypto investments come with risks, including the potential loss of funds. Always research before making financial decisions. Ulys does not provide financial, investment, or legal advice.