Sidechain – what is it and what is it for

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What is side chain

Sidechain is the most anticipated improvement of the decentralized Bitcoin network, which will become available in a few months and expand its functionality. This concept was first announced in 2014. If successful, the innovation will significantly affect the Bitcoin exchange rate.

Sidechain is an effective way to transfer digital currency to other blockchains. The idea is that these new blockchains will allow bitcoiners to work with new functions without changing the bitcoin network and creating new cryptocurrencies.

There are several types of sidechains developed over the past years, and each of them has its own security system. It is believed that sidechains do not have the same degree of security as the main bitcoin network, however, Bloq economist and creator of the driver chain Paul Storz does not agree with this assessment.

What characteristics will appear in bitcoin due to sidechain

Firstly, the security level will slightly decrease, but the throughput will increase, which will partly resolve disputes over what bitcoin is: digital gold or a global payment system.

Secondly, the mentioned Paul Storz is working on Bitcoin Hivemind – a decentralized forecast market. If such a sidechain is launched, bitcoiners will be able to hold the value of any asset as Bitcoin now allows, i.e. with 100% resistance to censorship.

Two other sidechains worth mentioning are MimbleWimble, which is a more private and scalable alternative to the current version of the Bitcoin blockchain, and RSK, which intends to add improved smart contracts to the bitcoin, following the example of ethereum.

How will sidechains affect the price of bitcoin

One of the main goals described in the white paper sidechains is to eliminate the need to create alternative tokens for new types of blockchain. In other words, one of the additional effects of sidechains is that altcoins need to disappear.

Now speculators operate on more than 1000 altcoins. However, sidechains are able to return the full value of these altcoins back to the bitcoin network.

Moreover, sidechains can increase the number of users of the bitcoin network, increasing confidence in its prospects in the absence of unnecessary competition. This, obviously, will affect the price upward.

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