Another promise of sidechains is the ability to have a stronger and faster mainchain, as transactions can happen on one of the sidechains. If users or developers are dissatisfied with the costs of sending a transaction and the transaction speed of the mainchain, they can use and or deploy their dapp on one of the sidechains. This leads to a more diversified network and a stronger, faster and more robust mainchain.
They rely on a technology called SPV (simplified payment verification) proofs, which work like this: in order to send money to a sidechain and back to the main bitcoin network again, users need to attach a proof that they really have the funds. Without these proofs, when users or miners move their money back to the main chain, under certain conditions, they could take more money than they really have.
A federation is a group that serves as the intermediary between a parent chain and its corresponding sidechain. It is an additional layer in the protocol but serves a key function and is what Blockstream’s Liquid sidechain uses. Due to the lack of expressiveness of Bitcoin’s scripting language, an externally implemented and mutually distrusting set of members form a federated peg.
In a cooperative consensus algorithm, there is a fixed number of voters. Voters cannot leave and join randomly. All voters know each other and every voter has only one vote. If the majority agree on the value of the data, then the system is working as designed. This can handle over 30,000 transactions per second. Scaling the number of voters can be an issue, because every vote proposed by a voter must be delivered to every other voter in the consortium.
First of all, one should not confuse private and public blockchains. They have one obvious similarity – they are blockchains, decentralized networks. Every participant of the network keeps a copy of this shared ledger, and all these copies are kept sync with the help of a certain consensus protocol. It means that all the participants of the network have access to identical information. Also, all the networks are immutable, and the information they contain can’t be altered.
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Pegged sidechains employ a two-way peg to transfer assets between chains, and they consist of providing proof of possession in the transferring transactions. The idea is to enable the capability of locking an asset on an original parent chain, which can then be transferred to a sidechain before eventually being redeemed on the original chain. Notably, the original asset on the parent chain is locked in a specific output address and is not destroyed like early implementations of sidechains.
Alpha functions as a sidechain to Bitcoins testnet. The peg mechanism currently works through a centralized protocol adapter, as stated in the sidechains whitepaper. An auditable federation of signers manages Testnet coins transferred to the sidechain. The federation is also relied upon to produce blocks through the signed blocks element. This creates the possibility of exploring the possibilities of the new chain using different security trade-offs.
Las sidechains son otro de los conceptos más famosos entorno a Bitcoin, no los pierdas de vista. La teoría indica que permitirían añadir funcionalidades nuevas a Bitcoin, pero sin necesidad de modificar constantemente el código de éste, ya que la funcionalidad es desarrollada utilizando otra cadena de bloque para finalmente ser conectada a la de Bitcoin. Al mismo tiempo esto evitaría la saturación de una sola cadena de bloques, como actualmente ocurre, al utilizar cadenas diferentes para cada caso de uso.
In this article, I will intent to do a public vs private (permissioned) blockchain comparison. This will include an examination of what exactly the roles of these two types of blockchain really are and why big businesses should quickly move to adopt them. This analysis will look at why private blockchains are better suited to big business use when compared to public ones.

People believe that permissioned means that only a select group of people can access the data and that’s the security feature. But it’s not. Since there is no real user data on the blockchain, (you) as a member of the public, can’t verify the actual content of it. This means that data resides in a location where corruption can stay undetected and data can be easily modified. So why does it even exist? Mainly because of the phenomena known as “hype surfing”; essentially reusing old technology and strapping a blockchain sticker on it gets IBM salesmen a foot in the door to institutions who can’t evaluate the technology accurately in the first place. Unfortunately, even some teams doing public token offerings started to sell this deeply flawed approach to the public.
At Iryo, we consider databases and blockchains that are not opened to the public to be insecure they, can easily be altered by the business running it, at their discretion and it goes against the ethos of the open and transparent cryptocurrency space. Designed to keep public out and introducing “trusted” middlemen, private chains forget that trusted third parties are security holes.

Bitcoin and Ethereum blockchains use the ‘proof of work’ (POW) consensus algorithm to provide maximum security. It relies on a process called ‘mining’, which involves nodes trying to find the cryptographic hash of the last recorded block in order to create a new block. This is a massive number-crunching operation. It’s computing-power and energy-intensive, and becomes increasingly costly as the blockchain length grows. Read more about POW in this article “Proof of work vs proof of stake comparison”. This makes such blockchains impractical in a large business context.
You cannot be a crypto investor or entrepreneur without having a real understanding of the differences between these types of blockchains as well as their implications. Even if they are based on similar principles, their operation is, in fact, different to all levels. So the tokens issued by these blockchains will not be assessed in the same manner.
Bitcoin and Ethereum blockchains use the ‘proof of work’ (POW) consensus algorithm to provide maximum security. It relies on a process called ‘mining’, which involves nodes trying to find the cryptographic hash of the last recorded block in order to create a new block. This is a massive number-crunching operation. It’s computing-power and energy-intensive, and becomes increasingly costly as the blockchain length grows. Read more about POW in this article “Proof of work vs proof of stake comparison”. This makes such blockchains impractical in a large business context.
But, rather than go back to the drawing board, many people are figuring out alternative way to eke better performance outbid the system, and one approach is to use a sidechain.. sonrsther than process many transactions on the bitcoin network, two parties that transact a lot together might deposit down bitcoin into a side chain and conduct a bunch of transactions there (avoiding the absurd cost and delay of bitcoin) and then when they want to “settle up” they then invoke a balancing transaction on the bitcoin network.
A partir de este momento, se podrán intercambiar y mover estas monedas para hacer uso del potencial de esa sidechain siguiendo las directrices y protocolo que ésta tenga estipulado. Por ejemplo, quizá la velocidad de creación de los bloques es más rápida en esta o quizá los scripts de transacción en esa cadena son turing completos (disponen de un poder de cómputo equivalente a la máquina universal de Turing).
This is what, at its core, state channels are. Imagine we wanted to play a game of Starcraft and have a smart contract that pays 1 ETH to the winner. It would be ridiculous for each participant to have to write on the main Ethereum network each time a Zergling was killed by a Zealot, or when a Command Center was upgraded to an Orbital Command. The gas cost (Ethereum gas, not Starcraft gas) and time for each transaction would be prohibitive.
When blockchain technology was introduced to the public in 2008 (via Satoshi Nakamoto’s famous white paper), it would have been hard to predict that private or consortium blockchains would become popular. But recently, there’s been a lot of buzz about this in the digital currency community. Many companies are beginning to experiment with blockchain by implementing private and consortium chains, although some people are critical of this. This discussion not only centers on use cases and benefits, but whether non-public blockchains are an appropriate application of the protocol to begin with.
A Sidechain, in simplest terms, is just a separate blockchain but is attached to the parent through the use of a two-way peg which allows for assets to be interchangeable and moved across the chain at a fixed deterministic exchange rate. This two-way peg works by utilizing simple payment verification or SPV as it's otherwise known. To show and prove ownership of the assets on the parent chain.
The Bitcoin Blockchain is a game changer, because it is public and permissionless. Anyone in the world can download the open source code, and can start verifying transaction, being rewarded with bitcoin, through a concept called mining. All stakeholders in the bitcoin network, who do not know and trust each other, are coordinated through an economical incentive framework pre-defined in the protocol and auto enforced by machine consensus of the P2P Network. The smart contract in the blockchain protocol therefore  provides an coordination framework for all network participants, without the use of traditional legal contracts. In private and permissioned blockchain, all network participants validating transactions are known. Bilateral or multilateral legal agreements provide a framework for trust, not the code.
Aelf uses a consensus algorithm called DPoS (Delegated Proof of Stake) that takes the best of both cooperative and competitive consensus algorithms. DPoS uses votes from stakeholders to achieve consensus. The competitive part is larger stakeholders having an influence on their delegate of choice. The delegates that have the most votes will take their turn to produce a block cooperatively in a sequence. DPoS makes transactions permanent. A rollback isn’t possible so a confirmation can be fast. DPoS is also scalable because anyone can participate in the consensus. Additionally, DPoS is environmentally friendly because electricity isn’t wasted like in Proof of Work.
These in-channel payments would be instant, unlike current Bitcoin payments, which require an hour to be fully verified on the blockchain. What’s more, payments would be routable across multi-hop paths, like packets across the Internet — so instead of having to create a channel to every new counterparty, you could maintain a few channels to a small number of well-connected secure intermediaries and send/receive money through them.
Perhaps blocks are created faster on that sidechain. Perhaps transaction scripts are “turing complete”. Perhaps you have to pay fees to incent those securing that sidechain. Who knows. The rules can be whatever those running that sidechain want them to be. The only rule that matters is that the sidechain agrees to follow the convention that if you can prove you put some Bitcoins out of reach on the Bitcoin network, the same number will pop into existence on the sidechain.
The consensus mechanism involves ascertaining transaction validity and uniqueness. Smart contracts address the validity portion. To ensure uniqueness, the protocol program in Corda checks whether any other transaction has used any of the input states of this transaction. If no other transaction has used any of the input states, that this transaction is unique.
A consortium blockchain is part public, part private. This split works at the level of the consensus process: on a consortium chain, a pre-selected group of nodes control the consensus process, but other nodes may be allowed to participate in creating new transactions and/or reviewing it. The specific configuration of each consortium chain (i.e., which nodes have the power to authorize transactions via the consensus process, which can review the history of the chain, which can create new transactions, and more) is the decision of each individual consortium.
If you’ve been keeping track of developments in the bitcoin industry, you’d know that the blockchain refers to the public ledger of transactions associated with the cryptocurrency. As the bitcoin ecosystem has grown in size and scale throughout the years, the blockchain has also increased considerably in length and storage size, prompting debates on whether or not to increase its block size limit.
Sidechains are blockchains that allow for digital assets from one blockchain to be used securely in a separate blockchain and subsequently returned to the original chain. The term “sidechain” in this case is used for context, in that the paper initially refers to Bitcoin as the “parent chain” and connected blockchains (altcoins) as “sidechains,” but the term is interchangeable so that altcoins interacting with each other can each be a parent chain interacting with sidechains. You may have also heard of “childchains,” which are also sidechains.
However, the Lightning Network would, again, require a change to the existing Bitcoin protocol. (Though again it would be a “soft fork,” i.e. the existing blockchain would remain fully valid.) And/or — you guessed it — a Lightning sidechain. What’s more, one of the changes it requires, the elimination of transaction malleability, is handled by the Segregated Witness work in Sidechain Elements. (correction: all of of the changes required are incorporated into Elements Alpha — it’s Lightning-ready out of the box.)
These kinds of blockchains are forks of the original implementations but deployed in a permissioned manner. Mainly hyped because the companies behind these chains want to onboard corporations in order to generate buzz around their their chain. It’s tolerable for proof of concepts or if they plan to move to public as soon as possible; otherwise they are just using the wrong set of tools for the job.
Another promise of sidechains is the ability to have a stronger and faster mainchain, as transactions can happen on one of the sidechains. If users or developers are dissatisfied with the costs of sending a transaction and the transaction speed of the mainchain, they can use and or deploy their dapp on one of the sidechains. This leads to a more diversified network and a stronger, faster and more robust mainchain.
RSK is the first open-source smart contract platform with a 2-way peg to Bitcoin that also rewards the Bitcoin miners via merge-mining, allowing them to actively participate in the Smart Contract revolution. RSK goal is to add value and functionality to the Bitcoin ecosystem by enabling smart-contracts, near instant payments and higher-scalability.
@gendal I am discussing private chains with prospects, so my interest is not superficial and theoretical. I see the benefits for the organization in using the private chain as another form of internal database, with better security properties. It can also be used where a service bus product would be today, to facilitate integration, conformance, monitoring, audit. Private chain can also, via a two way peg, be connected to the main chain, achieving a form of public/private network divide that routers created for us in the early stages of the Internet development. Anything else on the benefits side that I missed?
Because decentralization has been viewed by many as intrinsic to the revolutionary potential of blockchain, the point of private blockchains might be called into question. However, blockchains offer much more than a structure that accommodates decentralization. Among other features, their strong cryptography and auditability offers them more security than traditional protocols (although not bulletproof, as noted), and they allow for the development of new cryptocurrencies. Furthermore, voting platforms, accounting systems, and any type of data archive can arguably be optimized with blockchain technology. We are still in the early days of blockchain technology, and the power it has to reshape older systems has yet to be seen.
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