Sidechain

The link between a sidechain and its parent chain works through a lock-and-mint process: assets are locked in a smart contract or escrow on the main chain, an equivalent amount is minted on the sidechain, and the reverse happens (burn and unlock) when assets move back. Because the sidechain keeps its own set of block producers and its own rules, it can tune parameters, such as block time, gas costs, or virtual machine features, that the parent chain will not change for everyone else.

This independence is also the main trade-off. A Ethereum rollup posts transaction data or validity proofs back to Ethereum and inherits much of its security from the base layer, which is why it is classified as a Layer 2 rather than a sidechain. A sidechain instead relies entirely on its own validator set, often a smaller or federated group, to keep the network honest. If that validator set is compromised, funds bridged to the sidechain are at risk regardless of how secure the parent chain is.

Well-known examples include Polygon PoS, which bridges assets to and from Ethereum using its own proof-of-stake validators, the Bitcoin-anchored Liquid Network used by exchanges for faster settlement, and Ronin, a gaming-focused sidechain built for Axie Infinity. Ronin is also the industry's starkest warning: in 2022 attackers took control of a majority of its validator keys and drained roughly $625 million, illustrating how bridge and validator security, not the underlying blockchain, is usually the weakest link.

Sidechains remain popular for applications that need cheap, fast transactions and are willing to accept an independent security model in exchange.