What is a Side Chain?

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September 16, 2022

Understanding Side Chains: An Essential Blockchain Concept

In the realm of blockchain, a side chain plays a vital role in creating a comprehensive and interconnected ecosystem. This article delves into the concept of side chains, their mechanisms, and their relevance in the blockchain landscape.

Side Chains: Bridging the Blockchain Divide

A side chain is essentially an auxiliary blockchain connected to a primary blockchain, often referred to as the main chain. This linkage is facilitated through a two-way peg, allowing for seamless movement of digital assets between the main chain and the side chain.

The Vision of a Decentralized Ecosystem

Imagine a global decentralized network comprising diverse blockchains, each with its own unique rules and functionalities. Despite their independence, these blockchains coalesce to form a unified and seamless ecosystem. This vision embodies the essence of side chains.

Functionality of Side Chains

The intricate cryptographic mechanisms underpinning side chains enable tokens and digital assets to migrate effortlessly between the main chain and the side chain. An exemplary implementation of a side chain is the Liquid Network, acting as a settlement layer for faster and more private transactions, especially for digital asset trading.

The Side Chain Process

Initiating the Transfer

A user on the main chain begins by sending coins or digital assets to a designated output address, effectively locking them and rendering them unspendable elsewhere.

Confirmation and Security

After the transaction, confirmation is relayed across the connected chains. A waiting period ensues, enhancing security.

Transferring Assets

Following the waiting period, the coins or assets are fully transferred to the side chain, granting users the freedom to utilize them within this new network.

Returning to the Main Chain

Should a user wish to transfer the coins back to the main chain, a reversal of the initial process suffices.

Variations in Side Chains

Side chains manifest in diverse variations, tailored to specific functions. Notably, Bitcoin hosts both Liquid and Rootstock sidechains, each functioning uniquely. For instance, Rootstock specializes in efficient execution of smart contracts.

Pros and Cons of Side Chains


  • Established Technology: Side chains leverage well-established blockchain technology.
  • General Computation and EVM Compatibility: They support general computation and are compatible with the Ethereum Virtual Machine (EVM).


  • Centralization: Side chains exhibit a lesser degree of decentralization.
  • Separate Consensus Mechanism: They operate with a distinct consensus mechanism, not directly secured by the layer 1 blockchain, making them technically not layer 2.

Ethereum 2.0 and Shard Chains

Ethereum 2.0 introduces its variant of side chains known as shard chains, linked to the recently launched Beacon Chain. The ultimate objective is for the Beacon Chain to evolve into the primary chain in a proof-of-stake (PoS) based Ethereum.


In the rapidly evolving blockchain landscape, side chains are indispensable components that enhance interoperability and broaden the scope of decentralized networks. Understanding their mechanics and potential is vital for navigating the intricacies of modern blockchain ecosystems. Side chains, with their innovative two-way peg mechanism, not only facilitate the seamless movement of digital assets but also envision a future where blockchain networks collaborate harmoniously. This collaborative vision transcends the limitations of individual blockchains, offering a unified, global ecosystem that operates with diverse rules and functionalities, yet functions as one cohesive entity.

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