On Blockchain Scalability: What are Sidechains and Rollups?

Scalability on the blockchain refers to its ability to successfully cope with the ever increasing computing demand as more users adopt the service.

When it comes to scaling up a chain, the discussion narrows down to two approaches, which are not necessarily mutually exclusive: Sidechains and Roll-ups.

What are Sidechains?

Sidechains are compatible versions of the base chain, where transactions may be sent for processing off-chain and, if needed, they can be sent back to the base chain. Sidechains are connected to the mainnet by a two-way bridge, but they operate as independent blockchains with their own consensus mechanism. So the mainnet can operate on Proof-of-work and a sidechain use Proof-of-stake and communicate with each other.

How do sidechains work?

In order to support with the processing of transactions between chains, sidechains maintain a two-way peg with the main chain that they are connected to.

This allows users to send, for instance Ethereum from the mainnet onto the Polygon sidechain. However, the transfer never really takes place. The two-way peg simply locks the transferred amount on the mainnet and mints a mirrored version of the asset on the sidechain. This takes place through a smart contract that burns the token on the mainchain, and mints it on the sidechain. That’s why Ethereum sent to Polygon is available as wETH or Wrapped Ethereum.

How secure are sidechains?

As the name implies, sidechains operate in parallel with the base layer, and they’re not built on top of it. This means that there are additional security implications to be taken into account. Sidechains, for instance are unable to leverage the security of the base chain, unlike roll-ups which we’ll talk about in a second. The security of a sidechain needs to be addressed by the chain itself. The more popular a blockchain is, the more validator nodes it has, and therefore the more secure the chain is, which brings the discussion whether sidechains could be a security threat.