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Sidechain Networks

Blockchain has emerged as the most talked-about and significant technology recently. It has disrupted almost all industries and sectors today, from finance to manufacturing to automobiles to healthcare, to most others.

Its lesser-known counterpart or partner, Sidechain, is a new mechanism that needs much attention in the Blockchain and cryptocurrency world. There is a lot to know about this not-so-new concept. Hence, read along to unravel more details of this sophisticated mechanism.

What are Sidechains?

So is Sidechain a new concept? No. This Blockchain concept was devised on:

  • 2014, to address one of the challenges faced by Blockchain, which is scalability
  • In the year 2018, Blockstream launched Liquid which became Bitcoin’s first sidechain mechanism.

In technical terms, a sidechain is a cryptographic mechanism that lets digital assets and tokens move from one Blockchain to work on another and then move it back to its origin. This emerging mechanism allows nodes from one Blockchain to operate in another safely. It is helping to improve the efficiency and scalability of Blockchain.

To create a sidechain mechanism, it is vital to have an off-chain procedure. This off-chain process will allow data dissemination between the two Blockchains and will seamlessly transfer assets between them.

The two most popular sidechains operating on the Bitcoin platform are the Liquid Network and RSK.

How do Sidechains Operate?

Sidechains are crucial to scale up the capabilities of the existing Blockchains. They are a separate Blockchain that gets attached to the parent Blockchain in a two-way process. So how do they function exactly?

Using a two-peg way, the main chain (original Blockchain) user needs to deposit the assets or coins to an output address locked here. Once the transaction is done, an alert gets sent to the off-chain process, followed by a waiting period for the user.

Later, the digital assets are then fully moved to the Sidechain that lets users work in the new Blockchain network. Once the process is completed, the user can again move the deposited funds or assets back to their origin using the same process.

What are the Benefits of Sidechain?

Sidechains are a great mechanism to manage two Blockchains at the same time. Its two-way peg formula has grabbed attention due to its wide possibilities and potential in the Blockchain universe.

So, what are the main benefits of integrating sidechains into the Blockchain model?

  • Safe and Secure: Sidechains lets the potentially harmful and insecure software gets tested in its platform. If the software may harm the Blockchain under any circumstance, the damage is identified and defused within the Sidechain.
  • Security: Sidechains are responsible for monitoring their security. There are chances of it getting hacked when there isn’t enough mining power. However, since each Sidechain is independent, the damage done during hacking will get contained within each chain without affecting the entire main chain.
  • Lowers Burden: Sidechains can gravely reduce the burden of the mainchain from storing data and assets. It can store the data and assets whenever needed, thus improving the mainchains’ efficiency and speed.
  • Faster Transactions: This established technology can fuel the main chain of a Blockchain model. The result is faster and better transaction speed on the sidechains. Also, if you find the speed not up to the mark, you can install a decentralized app to one of the sidechains.

What are the Risks of Using Sidechain?

The incidents and happenings of fraud and hack are higher while using sidechains for transactions. Sidechains handle their security, and hence there is no additional security involved in safeguarding the funds and assets.

The fraudsters or hackers can target the mainchain, Sidechain, or, at times, the off-process. With just the gateway oracle with zero security, the hackers can carry out forgery and put all the funds at risk.

What are the Famous Sidechain Platforms?

There are a few well-known sidechain platforms that provide carried functionality and security to the Blockchain model. Here we will discuss two of the variations of the sidechains-Rootstock and Liquid Network. 


Also referred to as RSK, this two-way pegged bitcoin sidechain is compatible with Ethereum’s applications. It has created its open-source testnet for its sidechains named Ginger. Additionally, it even rewards the miners through the merged mining process.

So, what’s the main goal of RSK?

  • Enable bitcoin Blockchain to make faster payments
  • Focus on security and stability of the Blockchains
  • Recognize vulnerabilities on the platform and secure the funds of its users

Liquid Network

This sidechain platform is a settlement network that lets traders and trade-related platforms enjoy a confidential transaction. It allows the bitcoin transaction between the sidechains most privately and securely.

So, what are the goals Liquid needs to accomplish?

  • It enables a more private and secure transaction of funds between the traders on the Bitcoin network.
  • It accelerates the trading procedure, and hence users can enjoy a rapid exchange of bitcoins on the Blockchain platform.
  • The liquid network acts as the sole custodian of the information and data of each trader. It keeps all the transactions confidential and hence safeguards the whereabouts of each trader.
  • They help improve the efficiency of the Blockchain network with instant and multiple exchanges of bitcoins on their platform.
  • Liquid sidechain networks are highly reliable and hence recommended for trading personal purposes and data.

Wrapping Up: What is the Future of Sidechain Technology? 

Sidechains undoubtedly have immense potential and a lot to offer to the crypto world. They make interactions and transactions between chains seamless and scalable. However, there are a few downsides to using this platform in the Blockchain model.

They are prone to frauds and hacks due to their weaker security networks. Also, with its introduction, things in the Blockchain model may become more complex for users to figure out how to use this platform for their benefit.

With that said, if these challenges are curtailed and addressed, the future of sidechains seems bright, and its technology can disrupt the industries in the years to come.

Disclaimer: All information in the site is provided for informational and educational purposes only. We are not a financial advisor. The information in this article is not intended to imply any recommendation or opinion about a financial product and is not a financial product advice. You should obtain independent advice before making any investment decisions.

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