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Cryptocurrencies and blockchain technology continue to attract attention for their potential to significantly alter financial systems. One of the key concepts emerging in this transformation is the side-chain. A side-chain, or secondary blockchain, operates independently while being linked to and able to interact with the primary blockchain. The main objective here is to enhance the transaction capacity of the main blockchain network and introduce new functionalities. So, how exactly does this system work? Let’s take a closer look.
What is a Side-Chain and How Does It Work?
A side-chain is connected to the main blockchain through a bidirectional link. This connection facilitates secure transfer of assets between the two blockchains. For instance, to transfer BTC from the main Bitcoin 
$102,690 chain to a side-chain, it is first locked at a predetermined address. Then, equivalent tokens are generated on the side-chain. Once transactions are complete on the side-chain, the assets can be sent back.
A side-chain has its own consensus mechanisms. They can utilize various consensus methods such as Proof of Work (PoW) or Proof of Stake (PoS). This flexibility alleviates the main chain’s burden while also providing a space for testing new applications.
Key Features of a Side-Chain
The most critical feature of a side-chain is its ability to operate independently. Since they are separate from the main chain, errors do not impact the main network. Additionally, they can establish their own rules. Increased scalability and lower transaction fees are also among these fundamental characteristics.
Another key aspect is that side-chains can be optimized for specific use cases. For instance, one side-chain may be designed for high-speed micropayments, while another may focus on privacy-oriented transactions.
