Differences Between Sidechains and Rollups

Differences Between Sidechains and Rollups

Introduction

The growth of decentralized finance and the use of blockchain in other spaces amplify the demand for an efficient and scalable blockchain. While Layer 1 blockchains offer users a secure and decentralized way of performing transactions, storing data (using decentralized data management tools like The Graph), and exploring the internet (Web3), its prominent downsides include scalability.


Sidechains and rollups are designed to improve the scalability of Layer-1 blockchains, providing users with high throughput, low latency, and lower gas fees. This article exhaustively compares sidechains to rollups, providing users and developers with a holistic understanding of the two solutions.

What are sidechains

Sidechains are independent blockchains designed to enhance the scalability of the main chain while introducing a more efficient and cost-effective blockchain. As an alternative to Layer 1 blockchains, one notable feature is the total disconnection from the main chain. Hence, sidechains validate transactions and use a distinct consensus mechanism. However, a connection point is maintained using the two-way peg that transfers assets and data between the two blockchains (i.e., the main chain and the sidechain).

Different Types of Sidechains

  • EVM-compatible sidechains: These sidechains use the Ethereum execution environment for smart contracts without relying on its consensus mechanism or scalability. This compatibility feature enhances ease of usage for developers familiar with Solidity and Ethereum smart contracts. Examples of EVM-compatible sidechains are Avalanche, Fantom, and Celo.
  • Non-EVM compatible sidechains: Non-EVM compatible sidechains use a different execution environment and are incompatible with Ethereum smart contract. By implication, deploying or running Ethereum-based dApps on the network requires extensive coding and knowledge of a different programming language like Rust. An example of a non-EVM compatible sidechain is Solana.
  • Commit and Optimistic Sidechains: Unlike the general notion that sidechains operate independently of the main chain, commit and optimistic sidechains rely on the main chain for security, while holding the transaction/block data off-chain. Commit sidechains periodically send block headers to the main chain using a smart contract designed for it. Though the main chain cannot verify these transactions because transaction data is not available on the main chain, it can expect that honest validators in the ecosystem will raise queries against invalid or malicious blocks before they are validated.
    Optimistic sidechains operate similarly, but they do not run a different smart contract for validating blocks; instead, block headers are presumed to be valid until honest validators challenge them.
    A notable example of a commit sidechain is Polygon Proof of Stake, while Avalanche Nova is an example of an optimistic sidechain.

Pros: Why you should consider sidechains

  • Liquidity: The two-way pegged system allows easy transfer of assets on the main chain and the side chain. For instance, users can lock an asset on the main chain and access it on the sidechain.
  • Customization: Developers can design sidechains to cater to specific use cases, which may include optimized smart contracts, lower fees, or specialized governance models.
  • Independency: This is the ultimate sidechain property that allows for enhanced efficiency and scalability.

Cons

  • Data availability: The prominent disadvantage of commit and optimistic sidechains is the unavailability of data on the main chain, even when the system is expected to derive security from the main chain. Since data is not stored on the main chain, it can't validate blocks; hence, bad actors may get away with validating invalid blocks.
  • Security: Another security challenge faced on sidechains is the credibility of validators and the economic reward associated with running validation nodes on sidechains. Sidechains often require validators to stake lower assets, which makes it easy for them to compromise the system's integrity.

What are rollups

Rollup technology works by aggregating micro-transactions into a single batch off-chain. The aggregated transaction off-chain is sent to the main chain, where it is transaction is finalized and recorded. This allows rollup to enhance the efficiency of Layer 1 blockchain by reducing the volume of transactions it has to handle.

Types of Rollups

  • Optimistic Rollups: Optimistic rollups rely on the "innocent until proven otherwise" notion to offer scalable alternatives through swift transaction submission. However, after submission, the system triggers a process of finality. At this point, validators can publish fraud proof to contest the genuiness malicious transactions before validating them. Examples of this rollup include Optimism (OP Mainnet) and Base.
  • Zk-Rollup: Unlike Optimistic rollups,  zk-Rollups confirm the genuineness or validity of transactions at the point of submission. While this feature ensures system integrity, it reduces the speed of transacting but offers faster finality. Zero-Knowledge rollups are zkSync, Polygon zkEVM.

Read on the difference between zk-Rollups and optimistic rollups here.

Pros: Why Rollups may be the best alternative to sidechains

  • Security: Rollups generally offers an efficient and secure infrastructure for dApp development. Additionally, zk-Rollups comes with an impressive security framework. As the transaction's validity is confirmed when submitted, it becomes difficult for bad actors to compromise system integrity.
  • Privacy: While optimistic rollups operate like the regular blockchain regarding security, zk-rollups allow for private transactions, as they do not expose transaction details on-chain.
  • Lower Energy Consumption: By processing transactions off-chain, rollups can reduce the overall energy footprint associated with blockchain transactions.

Cons:

  • Finality: Rollups rely on the main blockchain for finality, so it often requires more time. For instance, finalizing transactions on Optimistic Rollups takes up to 7 days once a challenge period is opened.

Conclusion

Sidechains and rollups allow developers to develop decentralized applications without subjecting users to system congestion or high gas fees. Choosing between the two requires understanding the unique features and tradeoffs of the two scaling solutions. Explore dApp development on your preferred blockchain using the Chainnodes RPC free start package.