The terms state channels and sidechains are often misused by a lot of people. One major reason for this is the fact that a lot of people do not know the difference between them. Now, whilst sidechains and state channels are two of the major solutions to the issues of scalability that are associated with blockchain technology, they do not function in exactly the same way. With this article, we can find out why state channels and sidechains differ and what they really are.
What are Sidechains
Basically, a sidechain, just as its name states is a peripheral blockchain that is attached to the main blockchain through the use of a two-way peg. With the presence of a side chain, assets can be transferred between two blockchains (parent blockchain and sidechain).
What are state Channels
A state channel is a means by which a blockchain interaction which can be conducted on a blockchain gets conducted off a blockchain. This gets done even without a significant increase in the risk of any of the participants. It is one of the strategies that have been employed in an effort to tackle the issue of poor scalability in blockchain technology.
How State Channels and Sidechains differ
There are quite a number of ways in which state channels and sidechains differ. Let’s find out some of them.
The privacy setting of state channels is considered better than that of sidechains. The reason for this is simple. With state channels, whatever transactions that are taking place usually do not get exposed. They happen between participants. Apart from the opening and closing transactions, all other transactions that occur through a state channel usually occur within a channel.
Sidechains, on the other hand, do not have the privacy level that state channels have. Every transaction that occurs on a sidechain usually is publicly broadcasted.
State channels are more instant than Side Chains
In the use of state channels to deal with issues of scalability, as soon as an update is agreed on by the parties that are involved, there is a guarantee that this update is final and can be enforced. However, with the use of a sidechain, decisions are not usually instant and final. They are usually dependent on the mining power of the involved sidechain.
Sidechains can function properly in the absence of the participants that are involved in a transaction. On the flip side of the coin, for state channels to function, all participants that are involved in a transaction must be available.
Sidechains are Permanent
As soon as they are created, sidechains are permanent. When not in use, sidechains are never closed down; their assets are however locked pending the next time that they will be used. State channels, however, have to be created each time there is a need for them.