Topic: Layer 2 Vs Sidechains (Read 402 times)

It is not the exact same thing but it IS the same asset which is opposed to the asset being some other asset. This would effectively break the tie to bitcoin and make said chain a layer one if the native asset were different entirely.

Usage and denomination may seem the same on the surface (which is why there is a peg in the first place), but a pegged currency is almost by definition not the same as the currency it is pegged to.

Problem being, that pegs can (and do) fail for a variety of reasons. In the case of sidechains, there may be a flaw in the consensus algorithm or its implementation. The project itself may be abandoned. Future changes on the main chain could lead to incompatibilities. In the end this means keeping sidechain tokens will always add risk since sidechain security will always be lesser than the one on the main chain.

The native token is not the same as a token with parity to the native token. The main difference, as I already said, is that layer 2 inherits the security of the main chain, while side chains do not, since they have their own rules and consensus protocols.

I would not necessarily consider CoinJoin to be a separate layer in and of itself, or even a sidechain. It's just one of those applications  of using Bitcoin transactions in their normal way. Now the protocols that are built on top of CoinJoin, those you can call separate layers, because they have their own syntax. Whereas CoinJoin  is just an abstract idea.

Using 1:1 bitcoin is the same thing as using bitcoin there is literally NO DIFFERENCE

Liquid and RSK use 1:1 tokens with Bitcoin, not Bitcoin. Lightning on the contrary yes. I don't know of any layer 2 on Ethereum that doesn't use ETH for commissions. Polygon is sidechain, layer 2 rollup is under construction.
At no time have I talked about decentralization or recommended buying anything.

This is actually not an accurate distinction.

For example the lightning network is NOT a side chain it is a layer 2 and it uses real bitcoin and nothing else to make transactions.

The liquid network IS a side chain AND uses real bitcoin AND uses other currencies which it can create through covenants.

The rootstock network IS a side chain, uses real bitcoin and also allows for other smart-contract style assets.

Effectively both need to use the native currency of the base layer in order to operate AT ALL.

To go into consensus algorithm, a layer 2 generally does not implement consensus it WORKS WITH the available consensus at the base layer.

Side chains on the other hand REQUIRE a consensus mechanism as they are distributed chains of their own who need Sybil resistance in order to work.

Lightning doesn't have a "consensus mechanism" but they do have a TON of best practices for not allowing your atomic multi-path payments to become lost to counter-parties. All of this work is settled on the base layer of bitcoin so anything that happens in the lightning network happens at the whim of each individual user and their responsibility.over their assets on the channels.

To talk (briefly) about Ethereum (please dont discuss that shit here there's a dedicated altcoin space)
They have a few "roll ups" which are effectively groups of trusted parties who allow multiple users to batch transactions from the l2 to the main chain in one transaction. This is problematic because the trusted parties and the l2 itself become a censorship (and other exploit) vector because they behave effectively like an account with custody control. Since there has been NO attempt to build sybil resistance at the l2 layer on Ethereum (or at the base layer for that) and there has been no attempt to create a side-chain on Ethereum (because their community does not believe in distributed decentralized consensus mechanisms) you can HARDLY call any of these implementations a REAL l2 .

This is confusing to say, Polygon is both a layer one network and a side-chain on Ethereum. (Although I think it is highly centralized technology and do not recommend anyone use such a thing)

Could we say that layer 2 always uses the native currency of the mainnet?
For example, layer 2 of Ethereum, and that sidechain uses its own currency, its own consensus algorithm...

Difference between fusion and synchronization. I think it is well explained here.

https://ethereum.org/en/developers/docs/scaling/sidechains/

Sidechains that don't periodically merge, are no sidechains but just forks of the main chain, no?
That would be terrible. Especially without PoW, there would be no decentralized on such 'sidechain' (fork-chain ) either, right?

Well, because it has its own chain with its own consensus, it does not depend on the security of the main chain. If it merges with the main chain it is no longer a sidechain. Polygon is another example of a sidechain.

Imagine a sidechain, where coins are transferred from mainchain to sidechain by signing them, and they are transferred back by moving them on Bitcoin (and that would destroy them automatically on the sidechain). And imagine that such sidechain is Merge Mined with Bitcoin, so it is possible to mine both at the same time, with the same computing power. In this case, your security strictly depends on layer one, because it is constantly observed to know about all peg-ins and peg-outs.

So, again, the difference is in the name: "Each sidechain has its own chain".

But security of federated or centralized sidechain doesn't heavily rely on layer 1. For example, security of Liquid sidechain heavily involve "Functionaries".

Difference between what? In which case does the security not depend on layer 1?
To the best of my knowledge, all the items in my chart depend on layer 1 for security.

Your security doesn't depend on layer 1, that's the main difference.

Honestly, a sidechain can also be considered a second-layer technology. Since it relies on the blockchain (L1) and is linked to it. I think that is also the reason why there is no definition of what the difference between the two is. It's a subset / set element of 'L2'.

So, basically something like this.

My opinion is that Bitcoin requires 4 main characteristics, decentralized, secure, fast and cheap. DeFi and other things are fine in layers 2 and other protocols.

A lot of protocols, but time will tell which ones are good for packaging and sending off to normal users.

The truth is, it doesn't take much to cover the average bitcoin user:

- The Layer 1 (obviously)
- BIP39 seed phrases
- Standardized design specs for hardware wallets
- Lightning Network nodes (someone still needs to make a swarm of watchtowers that anyone can connect to, to solve the trust problems completely)
- Atomic swaps, between any two coins. Using something inside DeFi will work
- A protocol featuring high scalability but low confidentiality to be used as the network for payment cards

Sidechains are not protected by Layer 1 and they have their own consensus, unlike Layer 2.


The Technology Behind Atomic Swaps
A valid transaction requires a signature. This signature can only be created by the person that has access to the private key. When you send a transaction you usually sign it and broadcast it to the network afterward. HTLCs are based on a technology called state channels. All you need to know is that they allow you to exchange signed transactions securely. Only once the participants decide they are done transacting, the final state is broadcast to the blockchain.

The “Hashed” part of HTLC means that a hash serves as a lock for the contract, to protect it from a third party accessing it. The “Timelock” part refers to the contract having an expiration date.

Two conditions must be met to perform an Atomic Swap between two crypto assets: Both assets and their underlying blockchain need to support the same hashing algorithm, like SHA-256 in the case of Bitcoin and both blockchains need to support some kind of programmability that allows an HTLC to be deployed.