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Crypto Terms:  Letter S

What is Sidechain?

Sidechain - a blockchain ledger that runs in parallel to a primary blockchain and has two-way connectivity between the two chains.
2 minutes

Let's find out Sidechain meaning, definition in crypto, what is Sidechain, and all other detailed facts.

A blockchain ledger that is linked to the primary blockchain in two-way connectivity is referred to as a sidechain. These secondary blockchains have their own consensus mechanisms, which allow a blockchain network to increase its security and privacy while reducing the additional trust necessary to keep the network running.

This established cryptographic mechanism allows tokens and other digital assets to move anywhere freely from the main chain.

Liquid Network is a great example of a sidechain. It is a settlement layer that gives the possibility for traders and trading platforms to experience quicker and more concealed transactions as well as virtual asset development. Liquid Network is tied to Bitcoin, which implies that Bitcoin is the primary chain. Therefore, only activities connected to Bitcoin can be executed in it.

Sidechain envisions a worldwide decentralized network of many blockchains, each with its own system of laws, objectives, and features that stay separate from one another while forming one smooth environment.

Another example is Ethereum 2.0, which has its own variant of sidechains known as shard chains. These are linked to a newly formed Beacon Chain, which intends to eventually become the primary chain of Ethereum's Proof-of-Stake protocol.

Besides, based on the functions they are developed for, sidechains can come in several forms. Even though Rootstock, as well as Liquid, are both Bitcoin sidechains, they operate very distinctively from one another. For instance, Rootstock is particularly developed to conduct smart contracts in a more effective manner.

How Does a Sidechain Work?

  • To begin, the main chain user is required to transmit coins or other virtual assets to an output address where they are sealed as unspendable in any other place.
  • When the transaction is accomplished, a verification is sent through the chains. This is accompanied by a waiting time to provide additional protection.
  • Following that, the coins or assets are entirely moved to the sidechain, allowing participants to easily shift them around on the new network.

It should be noted that if the user wishes to return the coins to the main chain, he merely needs to reverse the operation.