What will you do when you suddenly get stuck in a traffic jam on a highway and have to wait for hours? That's right, you can turn onto a side road and continue driving through villages and fields. A similar story happened to blockchains.
The oldest and most demanded networks (Bitcoin and Ethereum,) get notoriously congested as demand clogs their throughput. Sidechains basically work as parallel service roads, to these main networks (mainchains); they provide an off-chain flow for transactions that take off some load on the main chain while increasing scalability.
So, in this post, we consider what are sidechains, how do sidechains work, their major pros and cons, and their applications.
So, what is a side chain, and how it works. These are independent networks not restricted to using the consensus algorithm of the main blockchain and the parameters of the block can be adjusted according to their own use cases. This customization results in quicker transactions and reduced fees.
Proof-of-Authority (PoA) and Delegated Proof-of-Stake (DPoS) are the most popular consensus models for sidechains. The validators on the sidechain confirm transactions, create blocks, and secure the network.
Besides, sidechain architecture can establish its own size of block and time intervals, which is not always the case on many main chains. This flexibility can increase throughput but decrease decentralization, especially if control becomes concentrated in a subset of validators or nodes.
A Two-Way Peg is an important concept that lets money be moved from one blockchain to another without compromising its value. It makes their users free to transfer their tokens in two ways from the mainchain to the sidechain and vice versa.
This is necessary for cross-chain transactions. A secure bridge between the two networks locks the asset on one chain and consecutively releases an equivalent on the other. When users wish to move the asset out again, the inverse process is initiated.
One prominent example is pegging Bitcoin to a sidechain which allows users to gain access to sidechain features (faster transactions, more flexible contracts) without losing the option to come back to the Bitcoin network at any time.
Two-way pegging provides blockchain interoperability and asset portability and is a core feature of the new multi-chain world.
Smart contracts and pegs serve separate, yet complimentary mechanisms in the structure and operation of sidechains.
A smart contract is essentially self-executing code that runs on blockchains, used to automatically process various things. In sidechains, they have several uses:
A peg is the connector, that ties the value of assets from the mainchain to the sidechain. Peg guarantees sidechain asset faithfully represents a mainchain asset.
Sidechains and Layer 2 chains are both trying to address the same problem: blockchain scalability. Yet they have different structures and perform different functions.
Layer 2 blockchain depends upon the security of Layer 1 blockchain, which it will be using as its base blockchain. In contrast, sidechains are separate blockchains with unique consensus mechanisms and native currencies.
As a result, Layer 2 solutions inherit the security of the main chain, while their competitors are secured by their own sidechain security mechanisms.
Sidechains also provide developers a testing ground upon which to trial new features and functionality, such as improved privacy, faster transactions, or complex smart contracts, which may not be practical on the main chain.
Sidechains have different consensus and security compared to their parent chain. It is essential to have a clear idea about these differences when comparing their trust models, and their use cases.
Table Comparison – Mainchain vs Sidechain Security & Consensus
| Feature |
Mainchain (e.g., Ethereum) |
Sidechain (e.g., Polygon PoS) |
|---|---|---|
| Consensus |
Decentralized (PoS/PoW) | Independent (often PoA/DPoS) |
| Security |
Native, economically robust | Does not inherit parent security |
| Operation speed |
Slower but more secure | Faster, but possibly less secure |
| Bridge dependence |
Not applicable | Critical to trust and safety |
| Attack risk |
Low (well-tested) | Higher (custom, newer setups) |
Sidechains have flexibility, scalability, and customizability with weaker/alternative security models. Their consensus algorithms can be rooted toward specific use cases but depend largely on trusted validators or federations. The security model is local and the sidechain blockchain can be at risk because the bridge is the most fragile part of the system, so audits and trust assessments are very important.
The decision to use either sidechains or rollups should be based on security requirements, L2 scalability targets, the trust model, and the application. Here’s a list of typical use cases for both technologies:
When to use a sidechain
When to use a rollup
As with any other technology, this one has both pros and cons. Let’s start with the main pros:
Offloading transaction processing can help to alleviate the congestion on the primary blockchain. It improves the overall results and increases the network throughput, like for example, the rootstock sidechain – the first and the biggest Bitcoin sidechain.
Sidechains are free to do whatever they want – developers can experiment with different consensus rules and parameters. That independence fosters innovation and allows for customized blockchain solutions.
EVM-compatible sidechains enable seamless porting and deployment of Ethereum smart contracts with little or big changes with great interoperability as well as faster dev cycles.
But for all their benefits, there are also some substantial issues with sidechains as well:
Each sidechain must secure itself. Issues on a sidechain generally don’t affect the main chain, but now this separation can mean vulnerabilities from potentially weaker security.
Sidechain establishment and operation can be resource-heavy. This frequently results in reliance on a small set of validators or trust authorities and results in centralization and governance issues.
Some projects have managed to successfully deploy sidechain crypto targeting certain popular needs. Here are a few of the highlights:
Polygon sidechain was originally introduced in 2017 under the name Matic Network before rebranding in 2021 with the addition of Layer 2 functionality. It was built to solve Ethereum's scalability and fee issues and is fully EVM-compatible, supporting frictionless migration of Ethereum dApps.
RSK is a smart contract platform that functions as a Bitcoin sidechain, launched in 2016. It enables users to create Ethereum-like dApps on Bitcoin by locking BTC on the main chain and minting Smart Bitcoin (SBTC) on the sidechain. And that is the DeFi magic of smart contracts for the Bitcoin network.
SKALE is a modular Ethereum-native multichain network that is meant to run as a sidechain but with some different design decisions compared to other classic sidechains like Polygon PoS or Gnosis Chain. SKALE itself is a modular, composable, decentralized network of elastic sidechains that enable dApps to scale and achieve high performance under a shared security model.
Formerly called xDai, Gnosis Chain excels at quick, predictable transactions and is well-suited for apps that rely on cheap and steady fees.
Loom Network is designed specifically for games and social apps, utilizing Delegated Proof-of-Stake (DPoS) to ensure high performance. It is a scalable environment for blockchain games or other interactive applications.
Sidechains are gaining in popularity amongst a wide range of verticals that are looking for ways to extend blockchain capabilities such as:
A more cohesive and dynamic crypto universe can be established with sidechains. A world-encompassing system in which many blockchains (each with its own governance, consensus, and aims) can interact via interconnected sidechains is no longer a future perspective, but today's reality.
This cross-chain interoperability is one of the fundamental benefits of sidechains: bringing together diverse blockchain infrastructures to form a unified, symbiotic environment, while still retaining separate sovereignties.
With the emergence of blockchain, sidechains have become a practical solution to critical problems such as scalability and interoperability. They bring flexibility, are independent, and can fit well into an existing platform, making them a powerful asset for the developer.
But the virtues are also mixed. Security, decentralization, and complexity must be kept in balance. If these issues are resolved, sidechains will have a very exciting future for blockchain infrastructure.
