If you’re a digital currency fan, then chances are at some point you’ve heard about sidechains. While they are not popular yet, sidechains allow cryptocurrency users to utilize their coins for various purposes on different blockchains, without having to purchase the afferent tokens or develop an entirely new digital currency.
To put things into perspective, it is important to understand the 3 main steps of a bitcoin transaction, these being:
The main purpose of the sidechain concept is to allow people to not only send Bitcoin to individuals, service providers, and Bitcoin addresses; but also to different blockchains. Practically, this isn’t possible, as each blockchain network deals with a specific token or digital currency, with no cross-compatibility.
If a user wanted to take advantage of features offered by another blockchain (e.g. speed, lower fees, better security, etc.), sidechains would come into use.
The sidechain protocol works as follows:
To regain access to the coins on the original blockchain network, the same principle would apply. You’d create a transaction immobilizing the afferent tokens, thus putting them out of your control. They would then disappear from the secondary chain, and once again be available on the original blockchain network.
In theory, the sidechain protocol leads to increased flexibility across blockchain networks by allowing users to spend their coins on various blockchains without needing to sell or purchase anything new. This allows individuals to take advantage of different blockchain network benefits, without being at a loss.
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