Bitcoin sidechains: a nascent market
Data from block explorers confirms that as of Oct. 17, a total of 9,661 BTC ($76.96 million) or a tiny 0.054% of today’s Bitcoin supply resides in three major sidechain projects.
Sidechains are separate blockchains tied to a cryptocurrency’s regular blockchain, i.e. mainchain. Users can interact with it via a pegging mechanism; they send funds to and from the sidechain, with security features ensuring coins are not available on both chains at once.
Sidechains have existed for several years and have various functions depending on developers’ aims.
Blockstream’s Liquid sidechain, or LBTC, for example, focuses on interexchange operability while giving traders enhanced features not yet available on the Bitcoin mainchain.