According to DeFiPrime and State of the DApp, in its stats, there are 221 Ethereum based Defi projects out of 244 and 2,849 Ethereum based DApps out of 3,635, respectively. A mere look at the above figures shows that Ethereum is the most demanding blockchain for DeFi and DApps. However, a Reuter report and Ethereum Price data show that 21 241,262 out of 1.1 million transactions failed in April, and there are high gas fees, respectively. Generally, scalability and throughput issues of the Ethereum network are discouraging more innovations on the web. Although the Ethereum network hopes to solve those mentioned above in its upcoming Ethereum 2.0 come 2022, there are already several solutions and techniques addressing them. Such solutions include sidechains and layer 2 networks.
What Are Side Chains?
First, it is essential to state that layer 2 is different from sidechains. However, they are both secondary layer solutions. While layer 2 solutions comprise non-blockchain networks that solve the scalability and interoperability but rely on the security of the base blockchain for security, side chains are smaller blockchain linked with the base or parent blockchain to solve the same problems differently and more efficiently. Although this article is focused on the Ethereum side chain, it is needful to say that there are other non-ethereum side chains, including bitcoin, Cardano, etc.
According to EthHub, Ethereum Sidechains are independent, Ethereum-compatible blockchains that leverage their own consensus model, usually Byzantine Fault Tolerance (BFT) methods and block parameters to efficiently process transactions. Ethereum side chains are secondary blockchains operating independently and in a parallel capacity to the parent network mainnet; in this case, Ethereum mainnet. The two blockchains are connected by decentralized validators called federations and pegging. Pegging is a symmetric validation process that allows cryptocurrencies to be imported from a blockchain and returned to other blockchains. A Federation is an intermediate layer or a bridge between the base and side chains that manages the users’ cryptocurrency transactions. Unlike other scalability, interoperability, and throughput solutions, security is the responsibility of each sidechain; it is not directly inherited from Ethereum. Sidechains often incorporate alternate validator selection and consensus mechanisms to provide faster transaction times.
Why We Need Side Chains In Blockchain Ecosystem
Read more at
https://ledu-team.medium.com/cost-efficient-side-chains-for-erc20-token-transaction-39571d7aa812
