One of the biggest problems that the major blockchain platforms and solution providers have been trying to solve lately is scalability. Bitcoin, for being the first and major cryptocurrency has experienced major setbacks last year when there were too many transactions for the network capability and the prices for transactions’ confirmations skyrocketed. Moreover, Ethereum is also struggling to overcome the barrier of 15 transactions/second, which compared to, for example, VISA’s 45,000 tx/sec capacity, it is quite low.
To tackle this problem, many options have already presented but only two of them stand out from the rest: sharding and sidechains.
In this article, we are going to focus on the sidechains methodology, which has been identified by many experts as the most viable option to address the legacy scalability limitations of blockchain technology.
What is a Sidechain?
More than just a way to scale the usage of a specific cryptocurrency, sidechain are “specific blockchains which branch off a ‘main chain’, but are designated to a specific application or use case”. These new child blockchains under the parent blockchain can be used to create efficiencies in every single one of them as they can focus on one specific action, like high-speed or complex computations. With this approach, the main chain has “simply” the role to oversee and protect the entire network. This will make the main chain much lighter and faster and will make all the smallest chains more efficient and faster as well. This new system aims to solve big problems like resource segregation, poor governance and of course scalability limits.
Corporate Use Cases for Sidechains
It is not new that large corporations have been studying blockchain for quite some time now, hence they are much more open to new technologies than a few years ago. This means that they are now willing to experiment with sidechains as a valid solution for some of their current blockchain implementation problems. Here are a couple of use cases of how companies can leverage sidechains:
- Data Access
Ensuring that you share information with the right people and proving that it is trustworthy, might be challenging nowadays to banks. With sidechains you can easily split access across chains without ever compromising the whole chain, the main chain or the other sidechains.
- Network Efficiencies
Having to include many different operations and protocols in one single chain can have devastating effects. Not only the chain will be overloaded with information, hence it will become much slower and with higher transaction costs, but also it will not allow to create efficiencies in the chain to address a specific issue. With sidechains it is possible to dedicate each of them to one specific task or process like payment processing or authentication and make the main chain much “lighter” with much faster transaction confirmation speeds and for a lower transaction fee.
Although this technology is very exciting, it comes with some challenges. Like with any technology layer, there are costs involved, and for now, it is still not clear at what cost these sidechains can be deployed. Ultimately, it raises questions such as, is a sidechain capable of supporting a 51% attack and when it is compromised, will it affect the main chain as well?
We will have to wait and see, but as developments arise, blockchain seems to be getting closer to becoming vital in companies’ IT ecosystem.