Bitcoin (BTC) pioneer Adam Back talked about Bitcoin’s sidechains and their potential impact on the current altcoin market at the Transylvania Crypto Conference.

The main idea is that additional functionality built on top of Bitcoin’s blockchain via sidechains could make many of the altcoins unnecessary.

Bitcoin Sidechains The Future

The first whitepaper for Bitcoin sidechains was released five years ago. Fast forward to 2019 there are several implementations, with one of the most prominent being the Liquid sidechain developed by Blockstream led by Back.

Sidechains enable users to move their BTC between multiple, different blockchains which can allow for building a wider range of digital assets. Right now, most of the projects chose to build their own network and issue a separate token or coin.

If new functionality and features are built on top of Bitcoin with sidechains, today’s altcoins would theoretically become redundant. At the same time, the sidechain technology comes with an important trade-off – and mainly related to centralization and censorship resistance.

Adam Back is a strong proponent of building additional features and functionality on top of Bitcoin instead of spinning off different blockchains for every use case.

“In the history of altcoins, it seemed like there was a period where there were a huge number of them that had no features, and that played out. And then people started to need a new way to market them, so they added features. Some of them were real features, and some of them were stories to market.” said Back.

During a panel at the conference, Back emphasized that a modular Bitcoin Core could enable developers to simply build on this as opposed to creating an entirely new blockchain and token. However many choose to create a new coin due to better financial incentives, although Back believes this could change:

“This financial incentive will remain, but it will have less credibility because if you have a very easy to use extension mechanism for Bitcoin and examples of extensions that do something simple that you can build on, there’s not really a good story about why you’re doing it somewhere else,”

Not Exactly Decentralized

Most of current sidechains such as Blockstream’s Liquid are not entirely trustless and Back admits this:

“Your risk with Bitcoin is that, ultimately, the coins are escrowed in some way – in a somewhat decentralized way,”

Nevertheless, it seems likely that sidechains will still remain useful for niche use cases where decentralization is not vital. At the same time, sidechain technology could progress over the years to enable augmentation of the Bitcoin ecosystem with additional functionality without sacrificing the decentralization aspect.