Sidechains have generated growing enthusiasm within Bitcoin's developer ranks throughout the past year. The underlying promise is compelling: they could unlock new functionality for Bitcoin without re
Sidechains have generated growing enthusiasm within Bitcoin's developer ranks throughout the past year. The underlying promise is compelling: they could unlock new functionality for Bitcoin without requiring changes to the protocol itself. Skeptics insist sidechains remain vaporware. The criticism hasn't dampened momentum. The project draws support from experienced Bitcoin Core developers who understand the protocol. Blockstream, the startup they founded, raised $21 million toward the end of 2014 and continues pushing the work forward.
The company released Sidechain Elements in June. This represents a federated version of their two-way peg proposal, currently in alpha. The release gives Bitcoin developers and researchers room to experiment with sidechain concepts without touching the protocol's core. Implementation timelines remain uncertain. Some observers guess that a true, decentralized two-way peg might take five years to realize. Nobody has published a reliable projection.
Adam Back brings serious credentials to this discussion. He created hashcash, the cryptographic proof-of-work system that powers Bitcoin's security. Back founded Blockstream and serves as its president. Given his background, he understands how decentralized, two-way peg sidechains might eventually reach the network. MiningPool asked Back by email what prerequisites must exist for two-way peg support to work.
"Two-way peg support would generally be possible with any generic and sufficiently flexible scripting language, it is just a script that verifies a compact hash chain structure. Two-way peg appears almost — but probably not quite — possible today with Bitcoin script; however, I think we can fairly say this a historical accident due to slight limitations in bitcoin script, which had various opcodes disabled defensively for security reasons some years back. By doing some very advanced tricks across multiple transactions, it might even be just possible already (exercise for the reader)."
Back elaborated on the technical workarounds involving sophisticated transaction manipulation: "If someone can solve that exercise for the reader via advanced Bitcoin script hacking, we'd be very happy to hear from them."
Implementing two-way pegs requires either upgrades to Bitcoin's scripting system or targeted changes that unlock the necessary functionality. Back laid out the essential next move. Before decentralized sidechains become practical, developers need to produce a formal proposal. He explained: "I think the next step would be for someone to make a concrete proposal for community review (i.e. a BIP) and an example implementation, and then for there to be a design discussion with perhaps alternative methods compared side by side [and] evaluated by the community as has happened with prior BIP proposals and review process."
Modifying Bitcoin's core protocol demands deliberate, methodical review. This sluggish process exists by intention. That dynamic partly explains why many developers view sidechains favorably. The technology creates avenues for new features without requiring continuous tinkering with the protocol. Back assessed how the technical community views the concept: "We can say that generally technical people have been quite supportive of the idea of sidechains and the flexibility it adds for experimentation and extension, but it's quite difficult to predict a time-frame as a specific proposal has not been made yet, and how long that would take depends on the technical community reaching consensus on alternative proposals. Bitcoin BIP community consensus is focussed on security and tends to prioritize new features by utility to the community."
The federated peg approach provides an interim solution. It demands less trust from participants than a fully decentralized alternative. Back explained how this preliminary model connects to the ultimate goal. The federated version serves as a testing ground that could eventually give way to truly decentralized two-way peg sidechains: "In the mean time there is an approach to get a similar effect using a functionary model with multi-sig as a protocol adaptor, as described in appendix A of the sidechains white paper, so people can use side-chains in a different security model in the mean time. We used this approach in the elements sidechain alpha release that we released in June, and if side-chains using the functionary model are popular it may help make the case for why a 2wp operator to improve them would be useful to integrate in Bitcoin."
Predicting when two-way peg sidechains arrive is impossible at this stage. Proposals centered on sidechains have a stronger chance of achieving consensus than other major protocol modifications like block size expansion, a debate that has begun to splinter the community. Back conveyed measured confidence about the practical feasibility: "One can see that Bitcoin has added a number of quite interesting and powerful features over the previous years, so there is scope to see something become available in a reasonably timely way if there is strong interest."
