Definition: sidechain

A blockchain network that runs parallel to and interacts with the main blockchain. For example, Rootstock and Stacks are Bitcoin sidechains. They add smart contracts, which were invented on Ethereum, to the Bitcoin network by providing a bridge to and from the "main chain."

Sidechains can offer faster transaction processing with smaller fees than Bitcoin or Ethereum. In addition, sidechains can be developed to handle new types of transaction more easily than updating a major chain, and they can be used to test entirely new protocols.

Sidechains and Layer 2 Chains
The terms "sidechain" and "Layer 2 chain" are often used synonymously; however, sidechains generally have their own consensus algorithm and operate as an independent blockchain in their own right. They are also responsible for their own security and may issue their own tokens.

Layer 2 chains are more about accumulating small transactions quickly and summarizing them on the main blockchain. In addition, Layer 2 chains rely on the proven protocols of the main Layer 1 chain. Both of these auxiliary networks are evolving and are major topics in the blockchain universe. See Layer 2 blockchain, consensus mechanism and Bitcoin confirmation.

Layer 1 and Layer 2 Chains

Layer 1 is the primary blockchain, and Layer 2 refers to auxiliary chains that work in tandem with the main chain. The primary goal of these auxiliary chains is to process transactions faster along with smaller fees or no fees.