Note: Some would argue that such a system cannot be defined as a blockchain. Also, Blockchain is still in it’s early stages. It is unclear how the technology will pan out and will be adopted. Many argue that private or federated Blockchains might suffer the fate of Intranets in the 1990’s, when private companies built their own private LANs or WANs instead of using the public Internet and all the services, but has more or less become obsolete especially with the advent of SAAS in the Web2.
Sidechain is a blockchain that runs parallel to the main blockchain. It extends the functionality of interplorable blockchain networks. Interpolable blockchain networks signifies the ability to share data between different computer systems on different machines. It means that data can be sent and received between interconnected networks eliminating the possibility of negative impact to the networks. Sidechain enables this to be done in a decentralised manner to transfer and synchronise tokens between two chains.
Sidechain is a chain of blocks based on the main parental blockchain. Sidechains realize the new financial ecosystems via integration into Bitcoin. Relatively new to Bitcoin, the sidechain is an extension that enables the ability both to build a link between BTC and an altcoin and to create new independent services that work via the main Bitcoin blockchain. Using sidechains allows for the creation of various types of smart contracts, stocks, derivatives, etc. It is possible to develop a limitless number of Bitcoin or Ethereum-based sidechains with different tasks and features, assets of which will depend on the main blockchain’s volatility. It allows traditional blockchains to support several kinds of assets, payments, smart contracts and also to increase the level of security and anonymity of transactions.
Blockstream has also released an “Alpha” sidechain with all of those features up and running except the last, coupled to the Bitcoin testnet. (Used for testing Bitcoin software without putting real value at risk.) In the absence of the Bitcoin protocol change that will cryptographically secure the programmatic transfer of value between Bitcoin and sidechains, they’re cooperating with several external organizations to perform and validate those transfers. If and when that protocol change happens, though, pegged sidechains will be as permissionless, and as decentralized, as Bitcoin itself.
Of course, the drawbacks of public and private blockchains are still very much present in the case consortium chains. This all depends on the way each consortium is constructed: a more public consortium chain will bear the burdens of public chains, while a more private one might suffer from the relative lack of openness and disintermediation. The right configuration depends on the needs and vision for each specific chain. Strategy and tailoring are always necessary to get the best solution.
Necessity is the answer to that question, well for the short term anyway. Currently public & private blockchains still have a lot of challenging technological problems that need to be sorted out, with privacy and scalability being foremost. Gallactic’s blockchain can certainly help with scalability due to its multi-chain architecture that allows for massive scaling to rival and in most cases surpass other blockchains in the market with transactions at 300 per second on mainchain with the ability to scale up to hundreds of thousands per second when the multi-chain model is configured for speed.
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Things get a bit more interesting when you replace the single custodian with a federation of notaries by way of a multisignature address. In this model, a federation of entities must sign-off on movements to and from the sidechain, so more parties must be compromised for a failure situation to unfold where the bitcoins frozen on the main chain are stolen.
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.
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