Sidechains: how do they solve the scalability problem?

Brief: Sidechains are parallel blockchains that operate autonomously and are connected to the main chain via two-way bridges for asset exchange. They allow for faster transaction processing and reduced fees, but require a compromise on decentralization and security.

Why did the idea of sidechains arise?

Cryptocurrency network developers have long struggled with the problem of scalability. Major blockchains are often overloaded, leading to slow confirmations and high fees. In October 2014, Adam Back and his team of cryptographers proposed a solution – the concept of pegged sidechains in the paper “Implementing Blockchain Innovations through Pegged Sidechains”. This idea significantly initiated the development of alternative network architectures.

What is a sidechain really?

In simple terms: a sidechain is a separate blockchain that operates alongside the main chain. They are connected by a bridge, through which tokens can move freely back and forth. The main feature is that a sidechain is not just a copy of the main chain, but a completely independent network with its own rules of the game.

How do sidechains differentiate from regular blockchains?

The main difference is the freedom of configuration. Sidechains can use any consensus mechanisms that their team deems necessary: from Proof-of-Authority to Delegated Proof-of-Stake. The same goes for block parameters – size, generation time, throughput – all of this can be configured to meet specific needs.

Sidechain validators verify transactions and create blocks independently, which speeds up the process and reduces the cost of operations compared to the main chain.

Why do developers love EVM-compatible sidechains?

If the sidechain supports EVM (Ethereum Virtual Machine), developers can deploy smart contracts written in Solidity on it without any modifications. This means that decentralized applications (dApps) and contracts from Ethereum can be transferred there almost without any rework. For the developer, this is extremely convenient.

What are sidechains paid for?

Every technology has a price, and sidechains are no exception:

Pros:

• Scalability – the main blockchain is offloaded, transactions are processed faster and cheaper.
• Flexibility – teams experiment with new parameters and consensus mechanisms without risking the main network.
• Convenient for developers – EVM compatibility means that existing applications can run without rewriting.

Cons:

• Decentralization decreases - to achieve speed, often a smaller number of validators is needed, which means greater concentration of power.
• Security – the sidechain is responsible for its own security, and issues on the sidechain do not directly affect the main chain, but they can cause harm to users.
• The complexity of implementation – launching and maintaining a sidechain requires serious resources and knowledge.

Real examples of sidechains that work

Polygon – combines sidechains with the Plasma framework for scaling Ethereum. It provides security and speed for decentralized applications.

SKALE – offers elastic sidechains designed for developers who want to build high-performance dApps without compromising on convenience.

Gnosis Chain – uses xDai for fast and cheap transactions, focusing on simplicity for everyday users.

Loom Network – specializes in games and social applications on the blockchain, using DPoS for high throughput.

Conclusion

Sidechains are not a panacea, but a well-considered solution to the scalability problem. Their autonomy, combined with EVM compatibility and bridges to the main chain, opens up new opportunities for the application of blockchain technology. However, the choice of a sidechain requires an understanding of the trade-offs – decentralization vs. speed, convenience vs. security. As the blockchain ecosystem evolves, the role of sidechains in creating a more scalable and flexible network will only increase.

Related:

• Sharding: an alternative approach to scaling
• What is Plasma and how does it help Ethereum?
• The choice between L2 solutions and sidechains: what to choose?