The Sidechain Architecture

A sidechain is a mechanism that allows your bitcoins or other tokens to move to a completely other blockchain, trade them and then move it back to the bitcoin blockchain. Users can then have access to new and innovative cryptocurrency systems.

It is possible to move the bitcoins back to the main bitcoin blockchain. This you call a two-way peg. It allows you to move it back and forth. It means a side chain is a separate blockchain that is attached to its parent blockchain using a two–way peg. This transfer is, in fact, an illusion: bitcoins are not transferred, but temporarily locked on the Bitcoin Blockchain while the same amount of equivalent tokens are unlocked in a secondary blockchain. The original blockchain is usually referred to as the mainchain and the additional blockchains are referred to as the sidechains or the childchain.

On Ethereum the Loom Network allows developers to build large–scale games and social apps by using DAppChains. DApps run on their own sidechains. A dApp is an Application Specific Sidechain and runs parallel to a mainchain like in Ethereum’s case.

It is very difficult to attack a blockchain. An attacker needs to spend an enormous amount of resources in order to attack the chain. With sidechains, the network has to have its own security and blocking processing. Side chains are responsible for their own security and could be attacked if there is not enough mining power to secure it. Sidechains need their own miners. If the main chain becomes compromised, the sidechain can still operate, but the peg will lose most of its value.