A federation is a group that serves as an intermediate point between a main chain and one of its sidechains. This group determines when the coins a user has used are locked up and released. The creators of the sidechain can choose the members of the federation. A problem with the federation structure is that it adds another layer between the main chain and the sidechain.
Implemented by The initial design was published by Blockstream in 2014, but the implementation is blocked by the lack of native support for SPV proofs in Bitcoin (which may not be added at all). Rootstock workaround this by sacrificing decentralization (still work in progress). The Ardor platform created by Jelurida is the first to propose and implement the concept of Child Chains. Already running on testnet, the production Ardor launch is scheduled for Q4 2017.
The first question to answer is “What is public blockchain?” The very name of this type of networks implies that they are open and permissionless. It means that anyone in the world can join the network, add blocks and view the information stored there. Indeed, public blockchains are totally transparent as any of their members can audit them. For this reason, independent participants can easily agree on transactions without middlemen and the fear of deception.
The term “sidechains” was first described in the paper “Enabling Blockchain Innovations with Pegged Sidechains”, circa 2014 by Adam Back et al. The paper describes “two-way pegged sidechains”, a mechanism where by proving that you had “locked” some coins that were previously in your posession, you were allowed to move some other coins within a sidechain.
Blockstream believes that to be secure, blockchain systems must be built with open source technology. Towards that goal, we've created the Elements Project, a community of people extending and improving the Bitcoin codebase. As open source, protocol-level technology, developers can use Elements to extend the functionality of Bitcoin and explore new applications of the blockchain. Join the expanding group of individual and corporate developers using Elements to build robust, advanced, and innovative blockchains.
The words block and chain were used separately in Satoshi Nakamoto's original paper, but were eventually popularized as a single word, blockchain, by 2016. The term blockchain 2.0 refers to new applications of the distributed blockchain database, first emerging in 2014.[13] The Economist described one implementation of this second-generation programmable blockchain as coming with "a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level."[1]

Further, despite sidechains being independent of each other, they are responsible for their individual security and need the requisite mining power to remain secure. Bitcoin’s blockchain has sufficient PoW mining power to remain secure even from the most coordinated of attacks, but many more nascent sidechains lack the necessary network effects and mining power to guarantee security to users.
Consortium blockchains: a consortium blockchain is a blockchain where the consensus process is controlled by a pre-selected set of nodes; for example, one might imagine a consortium of 15 financial institutions, each of which operates a node and of which 10 must sign every block in order for the block to be valid. The right to read the blockchain may be public, or restricted to the participants, and there are also hybrid routes such as the root hashes of the blocks being public together with an API that allows members of the public to make a limited number of queries and get back cryptographic proofs of some parts of the blockchain state. These blockchains may be considered "partially decentralized".

A user on the parent chain first has to send their coins to an output address, where the coins become locked so the user is unable to spend them elsewhere. Once the transaction has been completed, a confirmation is communicated across the chains followed by a waiting period for extra security. After the waiting period, the equivalent number of coins is released on the sidechain, allowing the user to access and spend them there. The reverse happens when moving back from a sidechain to the main chain.


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.
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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.
Consider a proof-of-existence application, where you want to authenticate your document in the Ethereum (for example) network, but you do not need your document to be online. So, you will store the hash generated from your document in the blockchain, but the document itself will be in your local machine, out of any blockchain-related structured, being off-chain.

So if you want to create a more secure Sidechain, we would seriously need to have a look at incentivizing miners in other ways. These could include things such as the Sidechain raising outside funding from investors in order to pay the miners. Staggering mining award so miners have an incentive to keep mining as they will be paid later on rather than at the time or the Sidechain could issue its own mining award on top of the already existing transaction fees and essentially just become an Altcoin.

It might seem that this technology is beneficial for any business, but it is not. Quite often projects fail to justify their will of public or private blockchain implementation. The key reason to use blockchain is the inefficiency of existing centralized solution that is slow, expensive, and lacks transparency and reliability. In other cases, blockchain isn’t required.
Liquid is the world's first federated sidechain that enables rapid, confidential, and secure bitcoin transfers. Participating exchanges and Bitcoin businesses deploy the software and hardware that make up the Liquid network, so that they can peg in and out of the Bitcoin blockchain and offer Liquid’s features to their traders. Liquid provides a more secure and efficient system for exchange-side bitcoin to move across the network.

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.)
That might sound like a problem, but it isn’t because the box can only be opened infrequently (two or three times a year), and a super-majority of miners must leave a note on the box in advance. This note states exactly where the miners intend to transfer the money. The “correct” note is automatically generated by sidechain software, and is easy to check.
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.

Plasma is a proposed framework for incentivized and enforced execution of smart contracts which is scalable to a significant amount of state updates per second (potentially billions) enabling the blockchain to be able to represent a significant amount of decentralized financial applications worldwide. These smart contracts are incentivized to continue operation autonomously via network transaction fees, which is ultimately reliant upon the underlying blockchain (e.g. Ethereum) to enforce transactional state transitions.
@gendal, good question. Think of the identity hash as a bitcoin address, it is indeed public. So to assert anything with this identity you need to sign the object you are creating or changing with the identity’s private key. Specifically it is a private key that corresponds to a public key that you published in your identity’s object (json). The signature is not placed on the bitcoin transaction, as OP_RETURN has only 40 bytes. The signature is added to a [json] object that is modified with this identity. If you see any fault with this, please let me know.
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2) Yea, blockchain could be a suboptimal MQ Series, a slower append only persistent wire that has a lot of ready-made tools for audit and security analysis (ecosystem argument). As blockchain ecosystem grows all kinds of data transformation tools will appear (e.g. we are working on such). Inside blockchain could be tuned to be less PoW intensive and to cut blocks faster. Besides, the variations of PoS or a hybrid PoW + PoS scheme are emerging which could use the fact that inside, as you say, all network participants can have clear identities, unlike on the public bitcoin’s blockchain.
• ‘Difficulty’: In the Bitcoin network, miners solve an asymmetric cryptographic puzzle to mine new blocks. Over time the puzzle becomes easier, resulting in it eventually taking less than 10 minutes for each new block generation. Hence, the community updates the puzzle every 14 days and makes it more difficult, thus requiring even more computing power to handle the POW algorithm. The ‘difficulty’ parameter controls the complexity of the cryptographic puzzle. This parameter is also used in the Ethereum blockchain as well. Developers should assign a low value (between 0-10,000) to this parameter for this project thus enabling quicker mining.
The cheapest and most simple option is doing calculations on your local network (off-chain) and integrating with main blockchain by sending the results. It has flaws; you cannot live full advantage of blockchain as we do in bitcoin, because you will still have existing constraints of your current system. Despite all this, it is still a valid option; perhaps you won't need all the features of blockchain technology. Perhaps it is just enough to use blockchain only for your pain points. Factom can be considered under that kind of option. They used bitcoin wisely in their design. They hold the actual mass data in their network and utilize stability of bitcoin in their solution. This project is so successful that at coindesk magazine, it is saying that Factom can be used for the land titles in Honduras. http://www.coindesk.com/debate-f...
Ardor is a blockchain platform predicated on childchains (sidechains) that use proof of stake (PoS) consensus. It uses the primary chain as a security chain and the childchains for processing transactions to increase scalability. Their design is specifically focused on speed and efficiency through PoS consensus and removing blockchain bloat through pruning.
Let me explain. The Lightning Network allows for the creation of “micropayment channels” across which multiple Bitcoin transactions can be securely performed without interacting with the blockchain, except for the initial transaction that initiates the channel. There is no counterparty risk: if any party ceases to cooperate, and/or does not respond within an agreed-on time limit, the channel can be closed and all its outstanding transactions kicked up to the blockchain to be settled there.

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.
By contrast, the Bitcoin blockchain is not Turing complete since it has little to no ability for data manipulation. It has no ability for a user to deploy if else or goto statements. This is a bit of a simplification but anytime you hear someone say something is “Turing complete” you can do a quick check to see if there is functionality for data changes, memory changes and if/else statements. If there is, that’s usually what they mean.

It might seem that this technology is beneficial for any business, but it is not. Quite often projects fail to justify their will of public or private blockchain implementation. The key reason to use blockchain is the inefficiency of existing centralized solution that is slow, expensive, and lacks transparency and reliability. In other cases, blockchain isn’t required.


A private blockchain network requires an invitation and must be validated by either the network starter or by a set of rules put in place by the network starter. Businesses who set up a private blockchain, will generally set up a permissioned network. This places restrictions on who is allowed to participate in the network, and only in certain transactions. Participants need to obtain an invitation or permission to join. The access control mechanism could vary: existing participants could decide future entrants; a regulatory authority could issue licenses for participation; or a consortium could make the decisions instead. Once an entity has joined the network, it will play a role in maintaining the blockchain in a decentralized manner.
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