What is a Sidechain? (Complete Guide 2025)

Sidechains are a Popular Blockchain Scaling Solution: Here’s What You Need To Know  

Sidechains are blockchains that run in parallel to a Layer-2 blockchain, typically with the goal of adding scalability and flexibility while reducing gas costs for users and developers. Most sidechains, like Polygon, have been built alongside the Ethereum mainnet; however, some sidechains, like Liquid Network and Rootstock, are Bitcoin sidechains. 

Sidechains differ somewhat significantly from other scaling solutions, like Layer-2s (L2s), which are built directly on top of an L1 blockchain, and Layer-3s, which are themselves built directly on top of an L2 blockchain. The primary difference is that sidechains do not inherit the security of the L1 blockchain they are built alongside. In contrast, L2 chains directly inherit the security of the L1 they are built on top of. 

Sidechains also differ from other blockchain scaling solutions, such as Cosmos Zones and Polkadot Parachains. 

In this article, we’ll discuss some of the top sidechains on the market today, their importance and uses, and their comparison to other blockchain scalability solutions. 

Polygon: The Most Popular Sidechain 

No guide to sidechains would be complete without an in-depth discussion of Polyon, which is, by far, the largest and most popular sidechain in operation today. Polygon is a blockchain platform that focuses on creating a multi-blockchain network of Ethereum-interoperable sidechains. Polygon’s core native token, POL (previously MATIC), has consistently been one of the largest cryptocurrencies by market cap, reaching a record-high market cap of over $15 billion (as MATIC) during the 2021 bull run and today, still sitting at a somewhat impressive market cap of more than $1.8 billion. 

Since its launch in October 2017, Polygon, initially known as Matic, has undergone multiple iterations and evolutions. The project’s first core blockchain, the Polygon PoS Commit Chain, was one of the first popular Etheruem scaling solutions available to users and developers. The Polygon PoS Commit Chain was also one of the first popular proof-of-stake (PoS) blockchain networks.

This is because, at the time, Ethereum was still a proof-of-work (PoW) network, as it had not yet undergone “The Merge,” a September 2022 upgrade that transitioned Ethereum from a PoW to a PoS consensus mechanism, allowing validators to stake Ethereum for block rewards instead of utilizing energy-intensive mining. 

However, in 2021, Polygon updated its focus from its core PoS Commit Chain to Zero-Knowlege Proof (ZK-Proof) based sidechains. In March 2022, Polygon launched Supernets, which allowed developers to bootstrap EVM-compatible sidechains (known as Supernets). In March 2023, Polygon launched Polygon zkEVM, which allowed developers to create more efficient ZK-Proof-based sidechains with fewer development resources. Polygon also offers other scalability resources, including Polygon Plasma Chains, which act as “child” chains to the Ethereum mainnet. In October 2023, Polygon launched the POL token to replace the previous MATIC token. 

As of June 2024, an estimated 54,000 dApps utilized some part of the Polygon ecosystem, and as of October 2023, Polygon had an estimated TVL (total value locked) of close to $900 million. This is a far cry from the nearly $15 billion TVL Polygon had in June 2021. 

Overall, this means that Polygon, while still a major player, has declined significantly in popularity over the last three years, as more users and developers are deploying their assets to popular Layer-2 chains like Optimism and Arbitrum, as well as to newer Layer-1s, like Sui and Aptos. Despite this, Polygon remains a major player in the crypto space and will likely continue to host a wide array of dApps and a significant amount of TVL for the foreseeable future. 

SKALE: Another Popular Ethereum Sidechain 

SKALE, launched in January 2018, is another popular Ethereum sidechain. SKALE calls its sidechains “elastic sidechains,” as it has designed them to allow significant developer flexibility. Developers pay monthly subscriptions to utilize these elastic sidechains. While SKALE sidechains are gassless today, SKALE initially used its core SKL token for gas fees and governance, but today, the token is mainly utilized for governance purposes. The SKL token reached an all-time high market cap of close to $980 million in April 2022 and, as of October 2024, had a market cap of around $200 million. Accurate SKALE TVL data is more challenging to come by, but it has likely significantly decreased over the last few years, mainly for the same reasons as Polygon. 

Gnosis Chain: Ethereum Sidechain With An Integrated DEX

Gnosis was founded in 2015 as an Ethereum-focused blockchain infrastructure provider. In 2020, it transitioned to a DAO (decentralized autonomous organization), and in 2021, it merged with the xDAI stablecoin project to create Gnosis Chain, an Ethereum sidechain with a wide variety of use cases but a special focus on DeFi applications.  

One of Gnosis’s benefits is its CoW protocol, a permissionless decentralized exchange that permits users to swap ERC-20 tokens quickly and easily. Unlike most automated market maker (AMM) DEXs, the CoW Protocol matches buyers and sellers using multi-token batch auctions, settling trades at the best available price. This can lead to less slippage and protects traders against actors attempting to manipulate DEX transactions for maximum miner extractable value (MEV). 

In addition to the CoW DEX protocol, Gnosis has also developed Safe, a customizable Ethereum multi-sig wallet. Users can set a certain number of users to approve a transaction before it goes through, which can help protect a wallet’s assets if a single user’s key is lost or stolen. 

The Gnosis ecosystem consists of two blockchains: Gnosis Chain, the execution layer, which utilizes the xDAI stablecoin for payments, and the Gnosis Beacon Chain, the consensus layer, a proof-of-stake chain that allows users to stake the ecosystem’s native GNO token to secure the blockchain. 

Sidechains vs. Layer-2s and Layer-3s 

The main difference between sidechains and Layer-2s is that, while Layer-2s inherit the security of the Ethereum mainnet, sidechains do not. Layer-3 chains are built on top of Layer-2s and are generally considered appchains, as they typically host only a single decentralized application (DEX). 

Sidechains are connected to the Ethereum mainnet via a “two-way peg” system, which allows assets to be exchanged between Ethereum and the sidechain. In contrast, Layer-2s and Layer-3s use traditional bridges and do not require two-way pegs. 

Sidechains vs. Cosmos Zones

Cosmos is a popular blockchain network that functions as a “blockchain of blockchains.” Cosmos consists of multiple independent blockchains called “zones,” each of which can host one or more dApps. 

Cosmos Zones are interconnected via a hub-and-spoke model and use Cosmos’s Interblockchain Communication (IBC) protocol. Therefore, each zone can transfer tokens and data to other zones. Each zone can have a unique token based on Cosmos’s native ATOM token for transaction fees, staking, and rewards. 

Additionally, the Cosmos SDK allows developers to build their parallel chains if they want higher throughput or other chain-specific characteristics. Like many other chains, Cosmos is a proof-of-stake network, and the current top 100 ATOM holders act as validators. 

Therefore, Cosmos Zones are somewhat like both sidechains and Layer-2s, but they’re also different from either, as they have unique characteristics, including additional interoperability and a particular governance system. 

Sidechains vs. Pokadot Parachains 

Somewhat like Cosmos Zones, Polkadot Parachains have many of the characteristics of sidechains but are still substantially different. 

Polkadot is a network of Layer-1 chains connected to a “Layer 0” blockchain called the “Relay Chain,” which validates transactions from parachains. Groups of validators are responsible for specific parachains. Currently, the Polkadot ecosystem can only accommodate 100 parachains, which significantly limits dApp development. 

Parachains are obtained through auction-based bidding. After a party wins a bid, the parachain is leased to winners for 24 months, after which they’ll need to win a new auction to continue utilizing the parachain. 

Sidechain Security Risks and Hacks

While sidechains benefit developers regarding flexibility and scalability, they can pose serious security risks to users and developers. For example, in 2022, the Axie Infinity Ronin bridge hack resulted in the theft of more than $600 million in user funds. This Ronin hack did not target the sidechain itself but targeted the bridge where user funds were held. While Layer-2s, Layer-3s, and many other blockchain scalability solutions also utilize bridges, the Ronin hack is a potent reminder that sidechain bridges can be a significant point of vulnerability. 

Other Sidechain Alternatives 

While sidechains, L2s, L3s, Comos Zones, and Polkdaot Parachains can effectively give developers more flexibility and scalability when developing their dApps, they’re not the only solution. Specifically, Supra, a new Layer-1 blockchain, has developed Containers, a way for developers to have their isolated blockspace on Supra’s L1. 

Supra Containers allow for the use of any gas token, allow customizable fees, complete governance control, require no new validators, and have zero network congestion, making them a potentially superior alternative for all kinds of dApp developers. 

To learn more about Supra Containers, click here to read our whitepaper or watch an in-depth video that explains the core elements of Containers and their benefits for next-gen dApp developers who want lower fees, higher speed, and, most importantly, the flexibility and independence to do things their way.