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.
Decentralized web. The sidechain technology holds premises to expand one of the main values of the blockchains – the decentralization of confidence. There is no need for central structure behind the transactions - the holders of cryptocurrencies are free to use their assets the way they want. The sidechains make their deals even more protected and reliable.
If you want a deeper look at Proof of Stake check out our detailed POS post. In short, while Proof of Work is an effective mechanism to secure the blockchain and provides a trustless consensus paradigm, it’s extremely energy intensive because of all the computing power required to solve hash problems. Also, while it was meant to be decentralized, it’s actually becoming more centralized as miners consolidate and massive mining setups eat up larger shares of winning blocks.
The “three-part” transaction structure is very general but it only allows you to transfer ownership of Bitcoins. Some people would like to transmit richer forms of information across these sorts of systems. For example, a decentralized exchange needs a way for participants to place orders. Projects such as Mastercoin, Counterparty, NXT and others either build layers on top of Bitcoin or use entirely different codebases to achieve their goals.
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.
Confidential Transactions — At present, all Bitcoin transactions are completely public, albeit pseudonymous. Confidential Transactions, as the name implies, conceal the amount being transferred to all except the sender, the recipient, and others they designate. The resulting transaction size is significantly larger, but includes a sizable “memo” field that can be used to store transaction or other metadata, and is still smaller than eg Zerocoin.(Note that this isn’t as confidential as Zerocash, which conceals both the amount and the participants involved in any transaction, through the mighty near-magic of zk-Snarks. Mind you, Zerocash would require an esoteric invocation ritual to initiate its network. No, really. But that’s a subject for a separate post.)
Thus Tradle set out to build a meta-protocol that saves the data in the overlay network, and only puts minimal referencing data on the blockchain. There is a general grumpy consensus among bitcoin core devs and mining pool operators on allowing one small data chunk, a hash, per transaction. Many devs say it is not possible to secure this second overlay network. I agree, unless we use the blockchain to help with the task. We have a partial solution working, and are preparing a new design to improve it (partial, as it can not yet handle all known attacks). We are actively sharing the designs at various meetups (and on the github) and are inviting devs to find attack vectors and propose solutions. Tradle’s protocol not only relieves the pressure on bitcoin’s blockchain but is also able to handle larger transaction sizes than Counterparty and Mastercoin, so it can be used for complex identity, supply chain management and many other applications. It is also capable of handling attachment files, needed in the healthcare and financial industries.