Sidechain

Sidechain is a separate blockchain that runs in parallel to a main ("parent") blockchain and is connected to it by a two-way peg — a mechanism that lets assets move between the two chains. Sidechains add features (faster blocks, smart contracts, privacy) without changing the parent chain's protocol.

How the two-way peg works

1. A user locks coins on the parent chain (e.g., Bitcoin)
2. An equivalent amount is minted on the sidechain
3. To move funds back, the sidechain tokens are burned or locked
4. The original coins are released on the parent chain

Different sidechains use different peg implementations: federated (trusted signers), merge-mined, or cryptographically proven.

Examples

• Liquid Network — Bitcoin sidechain for faster, more private inter-exchange settlement. Operated by a federation of member institutions. Uses L-BTC pegged 1:1 to BTC.
• Rootstock (RSK) — Bitcoin sidechain adding EVM-compatible smart contracts. Secured via merged mining with Bitcoin.
• Polygon PoS — originally launched as an Ethereum sidechain; adds high throughput and low fees.

Sidechains vs Layer 2

Sidechains have their own consensus and security — they do not inherit security from the parent chain (Rootstock is a partial exception via merged mining). Layer 2 solutions like Lightning Network or rollups derive their security from the main chain's consensus, which is a stronger guarantee.

See also

• Blockchain
• Merge Mining
• Smart Contract