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.
Structure Side chains are independent blockchains that have a kind of "pegging mechanism", where at least one of the chains (main chain and side chain) is "aware" of the other chain and both tokens are pegged at a set ratio. Side chains need their own network security and block processing. "Child Chains" of the Ardor platform are tightly integrated into the main Ardor parent chain. All transactions are processed and secured by the parent chain forgers. This makes cross-chain transactions possible. Pruning will be enabled on child chain transactions in order to significantly reduce blockchain bloat by pruning the transactions on regular basis from the blockchain.
There are many critics of payment channels. Finding the quickest path between unconnected nodes is no trivial exercise. This is a classic “traveling salesman” problem that has been worked on by top computer scientists for decades. Critics argue that it is highly unlikely payment channels like Bitcoin’s Lightning and Ethereum’s Raiden will work as expected in practice due to complexities like the traveling salesman problem. The key for you is just to know that these projects and potential solutions to blockchain scalability issues exist. Many of the smartest minds in the industry are working actively to bring them to life.
The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta. They wanted to implement a system where documents' timestamps could not be tampered with or backdated. In 1992, Bayer, Haber and Stornetta incorporated Merkle trees to the design, which improved its efficiency by allowing several documents to be collected into one block.
Transparency does not, however, mean that public blockchains are completely unhackable. Any time data enters a digital network, it is subject to security breaches and unethical uses. Although public blockchains looks to be highly secure right now, there are always going to be bad actors interested in exploiting weaknesses in the system. This is often through hacking methods that are difficult to predict and account for — so claims of one-hundred-percent security in any technology should always be read with a critical eye
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A federation is a group of servers that act as an in-between point between the main chain and a sidechain. The Federation decides when the user’s coins are locked as well as when they are released. The developers of the sidechains can choose the members of the federation. The downside to using federations is that they add another layer between the sidechains and the parent chain.
This comparison might make you think that private blockchains are more reasonable to use as they are faster, cheaper, and protect the privacy of their members. However, in certain cases, transparency is more crucial than the speed of transaction approval. So, every company interested in moving their processes to a blockchain evaluates the needs and goals and only then selects a particular type of distributed ledger.
The block time is the average time it takes for the network to generate one extra block in the blockchain. Some blockchains create a new block as frequently as every five seconds. By the time of block completion, the included data becomes verifiable. In cryptocurrency, this is practically when the transaction takes place, so a shorter block time means faster transactions. The block time for Ethereum is set to between 14 and 15 seconds, while for bitcoin it is 10 minutes.
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Let us call the current Bitcoin System Bitcoin 1.0 and the sidechain Bitcoin 2.0 So one would take one unit of Bitcoin 1.0 and send it to an unspendable address (e.g. 1111111111111111111114bRaS3) they’d also submit cryptographic proof of the transaction signed by the same private key that sent the transaction as a transaction into Bitcoin 2.0. The protocol of Bitcoin 2.0 would entitle the user to receive one unit of Bitcoin 2.0 This is called “One-way Pegging” as the value of one Bitcoin 2.0 is equal to one Bitcoin 1.0. This system is only one way and creates a wormhole by which Bitcoin 1.0 disappears as there is no way of getting it back.
Given all of this, it may seem like private blockchains are unquestionably a better choice for institutions. However, even in an institutional context, public blockchains still have a lot of value, and in fact this value lies to a substantial degree in the philosophical virtues that advocates of public blockchains have been promoting all along, among the chief of which are freedom, neutrality and openness. The advantages of public blockchains generally fall into two major categories:
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Similarly, a side chain is a separate blockchain that runs in parallel to the main chain. The term is usually used in relation to another currency that’s pegged to the currency of the main chain. For example, staying with the Starcraft motif, say we had an in-game currency called Minerals (oh wait, we do!). We could allow players to peg their Ether (or ETH) to purchase more Minerals in-game. So we reserve some ETH on the main chain, and peg, say 500 Minerals to 1 ETH.
The top 10 Ethereum decentralized apps (DApps) have daily active user counts in the thousands. Compare this with a centralized platform like Facebook, which has over a billion daily users, and you can see just how small scale blockchain use still remains. For a detailed comparison, read “State of the DApps: 5 Observations From Usage Data (April 2018)”.
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"I see quite a few use cases for private blockchains, and they definitely have their place. Traditional institutions won't switch to a completely public blockchain from one day to the other. A private blockchain is a great first step towards a more cryptographic future. The biggest advantages of private blockchains in comparison to centralized databases are the cryptographic auditing and known identities. Nobody can tamper with the data, and mistakes can be traced back. In comparison to a public blockchain it is much faster, cheaper and respects the company's privacy. As a conclusion, it's better to rely on a private blockchain than no cryptographic system at all. It has merits and pushes the blockchain terminology into the corporate world, making truly public blockchains a bit more likely for the future."