Sidechain

A sidechain is a blockchain that is associated to a parent blockchain and can exchange assets through a two-way peg. The purpose of a sidechain is to permit scalable transaction settlement of a cryptoasset without causing network congestion on the main chain. A token holder on the main chain locks their coins by sending them to an output address, which releases a proportional number of tokens (determined by the peg) on the sidechain. The consensus mechanism, node architecture, and miners on the sidechain may be distinct from those of the main blockchain. Loom Network is an example of an Ethereum sidechain, and Blockstream’s Liquid is an example of a Bitcoin sidechain.