{"id":1217,"date":"2019-12-05T08:12:33","date_gmt":"2019-12-05T00:12:33","guid":{"rendered":"https:\/\/www.btse.com\/blog\/?p=1217"},"modified":"2023-03-08T03:58:57","modified_gmt":"2023-03-08T03:58:57","slug":"what-is-a-sidechain","status":"publish","type":"post","link":"https:\/\/www.btse.com\/blog\/what-is-a-sidechain\/","title":{"rendered":"What is a Sidechain?"},"content":{"rendered":"
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By now, we\u2019ve learned that outright scaling a blockchain through block size increases does not come cheap. The limited size of Bitcoin blocks means that the nodes underpinning the network can be run on low-spec hardware and that users can easily verify the integrity of transactions. An increase would drive up the cost of validation, meaning that many nodes would be unable to keep up with the network \u2013 thus harming its decentralization.<\/p>\n

It\u2019s clear that a layered approach is required: a system of ancillary protocols that can interact directly with Bitcoin, so as to allow transactions to occur without congesting the base chain. Perhaps the most popular example of this in recent years was the Lightning Network which leveraged some of Bitcoin\u2019s inherent properties to create payment channels capable of thousands of transactions, requiring only two on-chain events (opening\/closing the channels).<\/p>\n<\/div>\n

Another significant advance on this front is sidechains<\/a><\/span>\u00a0\u2013 as the name may suggest, these are essentially blockchains that run in parallel to a given chain. The idea behind this is that an asset on the native chain can be \u2018locked\u2019 on the main chain, before being \u2018released\u2019 on the sidechain (or vice-versa).<\/p>\n

The main advantage to sidechains is that they\u2019re unconstrained by the limitations of their progenitors, and can thus integrate new features to serve various purposes \u2013 such as faster throughput mechanisms, different consensus algorithms, and additional scripting functionality \u2013 without harming the security of the connected protocol.<\/p>\n

Let\u2019s say Bitcoin fees are high, but you have many transactions to make. You may opt to transfer, say, 10 BTC into a sidechain with much larger blocks (whether via a 2-way peg maintained by a third party or consortium<\/a><\/span>, or via merged mining<\/a><\/span>). Your BTC would become unusable, while you would receive 10 units of the sidechain\u2019s asset (we\u2019ll call them Side Coins).<\/p>\n

From there, you would be free to move those Side Coins <\/strong>however you see fit \u2013\u00a0paying for services, trading them for other cryptocurrencies, or even burning them for fun. Assuming you spent 8 of these coins when it came time to peg out, you\u2019d receive 2 BTC back.<\/p>\n

We\u2019ve seen these systems in play for some time now, with the merge-mined\u00a0RSK<\/a><\/span> providing developers with a platform to develop smart contracts that are secured by Bitcoin. More recently, Blockstream\u2019s Liquid Network<\/a><\/span> was delivered with a different approach, bringing to life Confidential Transactions, Issued Assets, and 1-minute block intervals.<\/p>\n

As you\u2019ll undoubtedly know if you\u2019ve been keeping up with BTSE, we\u2019re one of the launch members of the Liquid Network, and we are incredibly excited to support its ongoing development, both as a scaling solution and as a powerhouse of innovative new features.<\/p>\n

We\u2019ve recently integrated both Liquid Bitcoin (L-BTC) and Liquid USDT to allow our users to leverage the capabilities of the latest in sidechain advances for all of their trading needs \u2013\u00a0get started here!<\/a><\/span><\/p>\n

 <\/p>\n

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Our aim is to create a platform that offers users the most enjoyable trading experience. If you have any feedback, please reach out to us at\u00a0feedback@btse.com or on Twitter @BTSE_Official.<\/em><\/p>\n

Note: BTSE Blog contents are intended solely to provide varying insights and perspectives. Unless otherwise noted, they do not represent the views of BTSE and should in no way be treated as investment advice. Markets are volatile, and trading brings rewards and risks. Trade with caution.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

By now, we\u2019ve learned that outright scaling a blockchain through block size increases does not come cheap. The limited size of Bitcoin blocks means that the nodes underpinning the network can be run on low-spec hardware and that users can easily verify the integrity of transactions. 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