The popularity of bitcoin is growing by leaps and bounds. Due to this fact, new cryptocurrencies and various add-ons are being introduced to the market. The invention of sidechains has every chance of becoming a separate global network. This article reviews the strategies needed to perform sidechain transactions and explains how to use this technique to make the most out of your mining experience.
How Do Sidechains Work?
A sidechain is a mechanism used to move assets across blockchains. It functions as a blockchain extension that improves the range of asset interoperability. This enables the usage of digital assets (e.g. tokens) of one blockchain in another blockchain. Further, assets can be returned to their blockchain if necessary.
Think of sidechain as a separate blockchain, tied to the native chain. Accordingly, assets with the given speed can be interchanged. Parent blockchain is considered the main chain or the basis, and sidechains act as additional chains.
How to Use It
First, the miner has to transfer an asset to a specific address, which is eventually frozen by the members of the “federation”. This minimizes the possibility of their loss in some other place. When the transaction is completed, both parties receive a confirmation. For security reasons, there is a long term for incoming money on the account. Once the coins are transferred, the miner can spend them. In case he sends coins from sidechain to another blockchain, the process will be reversed.
Popular Sidechain Platforms
- Liquid from Blockstream is the first open-source platform with 2-way peg to Bitcoin; it rewards Bitcoin miners via merged mining. Company’s CEO claims that the technology is by far the largest functional system with procedural methods for bitcoin manipulations.
- RSK (Rootstock) has as a Turing-complete virtual machine that integrates with decentralized Ethereum applications. The platform was launched in 2018. The key network of the platform is called Bamboo. By this combined mining mode, blocks are being generated to the RSK network. RSK developers believe that soon their product will be able to generate smart contracts for Litecoin;
- Ardor blockchain platform provides the blockchain foundation for businesses to balance the strength of blockchain technology. It differs in that it uses Proof of Stake (proof of ownership) as a consensus algorithm. Also, sidechains are called “child chains”, as they are closely integrated with the main blockchain;
- The Lisk project in one of the leading projects in the cryptocurrency industry with SDK providing developers. The launch of the blockchain system in May 2016 generated significant attention and made it possible for the platform to finally establish and maintain Alpha SDK. This release has been an important milestone for the project that eventually gave rise to the Lisk Framework.
As we can see, the sidechain technology powers the popular cryptocurrency and continues to benefit business through decentralization, greater security and transparency.