Since the establishment of the Genesis block in January 2009, the blockchain, the distributed public ledger on which bitcoin is a native, has grown exponentially both in terms of adoption and the number of other applications that have been built on it.

Many hold the view that Satoshi Nakamoto’s thought about its design meticulously enough that it can scale as well as accept technological changes with no challenges in future.

Far from this rosy path, its implementation has continued to expose shortcomings such as rigidness to innovation. Given that it is not easy to significantly alter the core software of the blockchain, many latter developers have resorted to creating entirely new crypto coins that incorporate the features they wished bitcoin had.

Sidechains are expected to make altcoins unnecessary

This has resulted in hundreds of alternative coins in just less than seven years of Bitcoin’s existence.

Not every developer, however, thinks that this is the best way to improve the blockchain technology. Some believe altcoins are working against the digital scarcity, which is one of the properties that make Bitcoin money.

Nevertheless, almost all developers, entrepreneurs, users and enthusiasts of the blockchain technology support the idea of moving the ecosystem from Bitcoin 1.0 to Bitcoin 2.0.

One way of doing this that is getting a lot of attention from the Bitcoin community is the idea of Sidechains. It is what a team led by Adam Back, a cryptographer best known for developing HashCash, and Austin Hill, a Canadian entrepreneur and angel investor with a lot of interest in the digital currency, is pushing.

A whitepaper explaining how Sidechains will work and the changes the technology is bound to bring to the decentralized digital ecosystem was released on 22nd October 2014.

What is a Sidechain?

A Sidechain is a blockchain ecosystem that is independent of the Bitcoin network but interactable with it. It allows the movement of value, pegged on the bitcoin, to freely move it to the Bitcoin network as well as to other Sidechains without the intervention of a trusted third party.

These capabilities open up opportunities in many fronts. For instance, the emergence of specialized blockchain ecosystems will become a reality. One Sidechain could serve light payments that need quick confirmations through validating smaller blocks while another could take care of asset transfers or smart contracts.

Sidechains are also likely to discourage centralization within the cryptocurrency ecosystem. With the need to scale up through increased block size being inevitable, the number of nodes may go down given that the cost of hardware, software and bandwidth will also go up.

However, with Sidechains, the services within the ecosystem will be broken down into manageable sizes therefore making scaling not necessarily costly to individual miners and those running all types of nodes in the Bitcoin network.

Ultimately Sidechains will help the blockchain to scale up and increase capacity through extensions while at the same time encouraging innovation.