What’s a Sidechain and How Does It Work?

May 15, 2025 | 5 min read

What is a Sidechain?

Sidechains are separate blockchain networks that are connected to a main chain. They’re designed to boost scalability and enable different blockchains to work together more smoothly. Using a two-way peg, users can temporarily move their crypto from the main chain to the sidechain. Once the crypto is locked on the main chain, the same amount gets released on the sidechain.

The idea is to process transactions faster, cheaper, and more efficiently—without clogging up the main chain. This keeps the main chain secure and decentralized, while letting developers explore new features and use cases on the sidechain. A popular example is the Liquid Network, which helps exchanges send Bitcoin transactions faster and more privately.

Key Takeaways

A sidechain is a separate blockchain that’s connected to a main chain via a two-way peg
Sidechains are meant to solve scalability issues in blockchain networks
They have their own rules and consensus models, separate from the mainnet
Sidechains are used for faster transactions, experiments, and blockchain interoperability
Security and reliability are key challenges for sidechains

How Do Sidechains Work?

It all starts by locking a certain amount of crypto on the main chain—usually on a special wallet address. A process called SPV (Simple Payment Verification) can be used to verify that the transaction happened without needing to download the full blockchain. There’s often a short delay to prevent fraud. After that, the same amount of crypto becomes available on the sidechain.

This whole thing is usually managed by smart contracts, which make sure the process is fair and transparent. Once everything checks out, users can interact with their crypto on the sidechain and enjoy benefits like faster speeds or different features.

When it’s time to move the coins back, the process is reversed: the sidechain coins are destroyed, and the original ones get released on the main chain.

The Benefits of Sidechains

Developers came up with sidechains to tackle some of blockchain’s biggest challenges. Here are the main perks:

Better scalability: Sidechains handle a bunch of transactions off the main chain, easing the load. That means faster processing and lower fees on the main chain—super helpful for big networks like Bitcoin or Ethereum.
A playground for developers: Devs can test new features or protocols on sidechains without putting the mainnet at risk. For example, you can test a new DeFi app on a sidechain before launching it on the main chain.
Cross-chain compatibility: Sidechains help different blockchains talk to each other and share data—something that used to be super tricky.

The Downsides of Sidechains

Even though sidechains are a big win for blockchain tech, there are a few trade-offs:

Security risks: Since sidechains run separately and often have different security setups, they can be more vulnerable—especially when they’re new or don’t have many validators or miners.
Validator trust issues: Sidechains rely on validators to manage the movement of crypto. If those validators aren’t trustworthy, things can go wrong—or worse, be manipulated.
Not a silver bullet: Sidechains help with scaling, but they don’t fix everything. Communication between sidechains and the main chain can still cause delays or cost spikes. So for large-scale use, extra solutions might still be needed.

Real-World Sidechain Examples

Since sidechains first came onto the scene, several successful projects have popped up. One example is the Liquid Network—a Bitcoin sidechain made for faster, more private transactions. It’s mostly used by financial institutions and helps make Bitcoin more scalable. Another is Rootstock (RSK), which brings smart contract functionality to Bitcoin. RSK blends Bitcoin’s strong security with the flexibility of smart contracts.

There are Ethereum-based sidechains too—like Polygon. It was built to scale Ethereum and lower gas fees. Polygon’s a go-to for developers building decentralized apps (dApps), and Polygon also helps take pressure off the Ethereum network by enabling faster and cheaper transactions.

Final Thoughts

Sidechains help offload tasks from main blockchains, which cuts down on fees and opens the door to better scalability, flexibility, and innovation. They’re not perfect, but they’re a big step toward making crypto networks more efficient and adaptable.