SIDECHAINS
Introduction
Introduction
Off-chain transactions help to avoid congestion in the Ethereum network. Off-chain solutions include L2s and sidechains; these solutions help Ethereum scale. However, L2s inherit Ethereum L1 security while scaling it; sidechains, on the other hand, rely on their own security.
In this article, we’ll talk about sidechains and their technology.
Sidechains
Sidechains are EVM-independent blockchains that employ their own consensus algorithm and block parameter structure and are connected to the Ethereum mainnet by a two-way bridge.
Although using sidechains involves trade-offs, unlike L2 solutions, sidechains do not post back transaction data to the Ethereum L1, thereby not inheriting Ethereum’s security.
Sacrificing decentralization and security for increased throughput is more akin to an experiment, as were sidechains previously. But, with the dawn of Polygon, sidechain sustainability is feasible.
Technology
Sidechains are independent blockchains like L1s, but unlike L1s, sidechains work in parallel capacity to Ethereum, using bridges to facilitate the transfer of assets to and from the Ethereum mainnet. Sidechains are in charge of their own security and consensus processes, which allows for more innovation and, as a result, faster and lower-cost transactions.
Security and Consensus
One of the features that differentiate sidechains from Ethereum is the consensus mechanism sidechains use in order to attain security.
Some consensus mechanisms used by sidechains are:
Proof of Authority (POA)
Proposed in 2015 by Ethereum’s cofounder Gavin Wood; Proof of Authority is a variant of Proof of stake where instead of tokens, validators stake their reputation and identity. Identity here refers to the certainty that validators are whom they correspond to in their personal identity on the platform. A validator’s reputation is more important than possessions in POA.
Delegated Proof of Stake (DPOS)
DPOS was first conceived by Dan Larimer in 2013 and deployed in his project BitShares in 2015. Delegated Proof of Stake is slightly different from Proof of Stake in that users vote and select delegates, also known as validators, to produce and validate blocks. After a block is successfully produced, these validators then distribute block rewards to those who voted for them.
Byzantine Fault Tolerance (BFT)
The concept comes from The Byzantine General’s Problem, which was invented in 1982 by Leslie Lamport, Robert Shostak, and Marshall Pease. The Byzantine General’s Problem is a logical thought experiment where there are several generals that need to attack a city; the same applies to malicious actors, which represent the generals in this context, and a blockchain, which represents the city. In a future article, I’ll explain this concept.
BFT is a characteristic of a blockchain that can resist 1/3 of the nodes falling into malicious hands. A blockchain is said to have Byzantine Fault Tolerance when two-thirds of the network can reach consensus and continue to function properly.
In short, validators are responsible for protecting sidechains against malicious users.
Block Framework
Sidechains adopt different block frameworks ( faster block time, big block sizes, and higher gas limits) in order to achieve fast transactions and low gas fees. This is unlike Ethereum which places limits on its block times and size.
This may be beneficial for users but isn’t decentralized and secure for the network, as different block frameworks increase the difficulty of running a node, leaving the network to be secured by a few super nodes. This leaves a higher possibility for malicious attacks. Validating must be open to everyone, not just users with special sophisticated hardware, for a chain to scale without compromising decentralization.
EVM compatibility
Sidechains are EVM compatible, which means they are able to run contracts written in Solidity and other Ethereum smart contract languages. This means developers can deploy contracts meant for the Ethereum mainnet on a sidechain.
Dapps on Ethereum L1 can ship to a sidechain if Ethereum becomes congested for its performance and for users. This helps scalability, as users can enjoy the sidechain’s low gas fee and high transaction throughput.
Interoperability
In order for a separate blockchain to be a sidechain, it needs to be interoperable with the Ethereum mainnet. This is applied using a blockchain bridge. Bridges use smart contracts on Ethereum, and the flow of funds through bridges is controlled by a sidechain.
In order for this to be done, a mechanism is involved because funds aren’t physically moved across the two chains. A mint-and-burn process is done for assets to be transferred.
Popular sidechains include:
Conclusion
Sidechains sacrifice decentralization and security in order to achieve high TPS. However, Ethereum is committed to scaling without sacrificing decentralization or scaling. That’s why Rollup technology is the future.
Even though in the future sidechains may not have Ethereum activity as Rollups will take a huge chunk of that, we won’t fail to acknowledge that Polygon POS, a sidechain, has brought a lot of adoption to Ethereum.
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Please remember to do your research. None of this is financial advice.