As the boom and bust cycle returns to the upward trend, it’s time to take a look at what the major challenges the blockchain ecosystem faces. Support for infrastructure-based projects has grown with over a dozen blockchain-focused accelerators lending resources and publicity to projects that enrich the set of existing development tools.
The battle cry of the blockchain movement is pure transparency and decentralization. The issue is that many businesses won’t use a platform that exposes all of their data and code to the public. Privacy is important to many business models, and this is where the concept of inter-chain connectivity comes in.
Development of private blockchain technology has rapidly advanced thanks to numerous open-source initiatives and respective corporate partnerships. These private blockchains are designed to better fit corporate environments where transactions may need to be reversible, new nodes require proof of authenticity, and permissions are not universal. Private blockchains tend to water down most of the core tenets of decentralization in exchange for performance, since directly migrating data-heavy applications to a decentralized platform is astronomically expensive at this time.
As private blockchains become viable solutions for enterprise applications, efforts to tie them back into the distributed-ledger, decentralized, public forum have taken root. If existing public blockchain’s permissions, speeds, and transaction costs aren’t compatible with potential corporate use cases for blockchain, then maybe creating a dedicated private blockchain tailored the specific application’s specifications would still allow the technology to be used. The issue is that once you change the rules of a blockchain consensus algorithm by modifying any of the things mentioned above, the chain is no longer directly compatible with the original chain’s protocol. Each corporate blockchain would exist in isolation from all public blockchains.
This is where sidechains, parachains, and many other names for the same idea all come in.
The idea is to allow other blockchains with different rules to connect and exchange data with an established, larger chain. The Loom project uses this method for high-throughput sidechains focused on decentralized games. Plasma is another project that is using sidechains to increase the throughput of Ethereum by synchronizing Ethereum sidechains with the main chain. Most recently, Polkadot proposes to create a “United Network” to allow interoperability and data exchange across blockchains.
We are still caught at a time when existing public blockchains just aren’t enough in speed or throughput to support most existing applications that could be perfect candidates for decentralization. Efforts to increase main-chain speed continue, but for projects requiring incompatible protocol changes, side chains offer a way to interact with the decentralized, distributed community that represents a step in the direction of mainstream blockchain adoption.
