What Are Side Chains?

Sidechains are independent blockchains that connect to their parent chains via a two-way bridge. This bridge allows the transfer of assets between the two. These sidechains have some sovereignty, operating using their consensus mechanism. This means even if the sidechain has a security breach, the mainnet will remain secure. The primary purpose of the sidechain is simple — to help scale the parent blockchain. Although that can sound a lot like Layer 2 blockchains, sidechains have some fundamental differences.

Just like Rootstock is a side chain of Bitcoin, there are many side chains for other crypto networks, Ex: Ethereum has Polygon, Skale.

Fundamentals of Sidechains

Sidechains are integral to enhancing blockchain functionality and efficiency. Understanding what sidechains are and their role is fundamental to grasping how blockchain technology can evolve to meet growing demand.

A sidechain is an independent blockchain that connects to a parent blockchain (main chain) using a two-way peg mechanism. The primary purpose of sidechains is to alleviate scalability issues, increase throughput, and foster innovation without overburdening the main chain. Sidechains enable you to conduct transactions and smart contracts off the main chain, resulting in faster processing times and potentially lower transaction costs.

When you transfer assets from the main blockchain to a sidechain, the assets are locked on the main chain, and an equivalent number of tokens are minted on the sidechain. This process ensures that asset quantities are conserved across both chains.

Structurally, sidechains are equipped with consensus mechanisms that can be similar to or different from the parent chain. This flexibility in choosing a consensus model allows sidechains to experiment with various governance models and security protocols, customizing them for specific use cases.

Now, transactions on older networks such as Ethereum or Bitcoin are notoriously slow and expensive for users, problems that accelerate as more people use those networks. This makes them impossible to use on a mainstream basis. So how can the utility of blockchain be brought to bear on a larger scale?

Well, improving a blockchain’s scalability also impacts its security and decentralization. As such, layer 2 blockchains employ different methods in order to scale their parent networks. But before we dive into the details, let’s learn the basics:

What Is A Layer 2 Blockchain?

A layer 2 blockchain is a network that aims to scale its parent network by handling part of the blockchain’s capabilities with a secondary chain. There are a few different layer 2 scaling solutions and each of them has its advantages and disadvantages. But what is the point of a layer 2 blockchain anyway?

What Is a Layer 2 Blockchain For?

The Problem With Layer 1 Blockchains

The two most obvious examples of a Layer 1 network are Bitcoin and Ethereum. These blockchains are base networks – they handle every aspect of every blockchain transaction on-chain and without assistance from any other network.

But this makes transactions on those blockchains extremely heavy and slow. Every single new blockchain transaction must be validated by the network. Then, before a new block is added to the chain, it must be checked against the entire history of the network. There are no shortcuts in layer 1 blockchains.

Scalability is the ability of a system to handle increased load or traffic. In the context of blockchains, it is the ability to process more transactions per second (TPS) in order to meet the growing demands of users, something that layer 1 networks really struggle with.

A good analogy would be to imagine adding bricks to a pile – only, instead of adding each new brick to the top of the pile, you’re adding it to the bottom. To add a new brick, you have to pick up all of the existing bricks. Plus, that pile is constantly growing and becoming heavier, and there is also more demand than ever for new bricks to be added. So each new addition becomes a heavier, slower job. On the other hand, the sheer computational power required to complete this process is what keeps the network – and your crypto – secure. But on the other hand, it renders the system totally impractical for day-to-day use.

Essentially, that’s exactly how blockchains work, and how they can become slow and congested.

How Layer 2s Scale Blockchains

Layer 2 blockchains are so-called because they sit as a second layer on top of a base mainnet.

Layer 2 has one main purpose: to allow the network to process more transactions per second. Accordingly, they move transactions off of the heavy mainnet. Different layer 2 solutions achieve this in slightly different ways, but the objective is always the same: streamlining the amount of information that needs to be validated by cumbersome underlying blockchain.

There are a multitude of layer 2 blockchain solutions and each of them have their advantages and disadvantages.

Types of Layer 2 Blockchain

Sidechains

Sidechains are independent blockchains that have their own consensus mechanisms and then connect to their parent chains via a two-way bridge. This blockchain bridge allows the transfer of assets between the two. In short, the layer 2 network can execute transactions cheaper and faster, but they also have a connection to the parent chain. This allows the user to bridge their assets back and forth and benefit from the transaction speed a separate chain can offer. While that’s a simplification, make sure you check out our article on what a sidechain is to find out the details.

Rollups

Blockchain rollups are another type of layer 2 solution that involves pushing multiple crypto transactions together in one block. This means they are processed in a single transaction, which reduces fees for the user, but also saves data space on the blockchain, which can otherwise cause network congestion. There are two main types; Optimistic and ZK Rollups. Both rollup types consolidate transactions, but some methods are more decentralized than others. Optimism is a great example of a chain that uses optimistic rollups to scale Ethereum.

Why Are Layer 2 Blockchains So Important?

Lower Cost and More Efficient for Users

For users, these blockchains are dramatically faster and cheaper to use. Keeping the nuts and bolts of low-value transactions off-chain means users can transfer assets quickly and with minimal network costs.

Broader Blockchain Utility

By facilitating transfers of value that are fast and efficient, layer 2 solutions open up broader possibilities for blockchain application. A great example of its possible impact includes El Salvador, where Bitcoin is legal tender. To illustrate, this would not have been possible without the speed and efficiency of the Lightning Network.

Relieves the Mainnet

Layer 2 solutions don’t just benefit their users, but also the crypto ecosystem as a whole. With large segments of the network activity handled off-chain, congested mainnets are relieved of much of their traffic. This means a faster, more efficient system for transactions on the parent network. Plus, users pay lower transaction fees than they would on the parent chain too.

Opinion/Thoughts

As web3.0 grows and the inflow of users increases blockchain technology will be improving exponentially manner and we need to adopt various different forms of solutions, Side chains and layer 2 are such examples of it without worrying about the future one can only work in the present So on that said Have a nice day!