Sidechains: A technical and historical overview of what works where we're going

Sidechain experiments have been around for years, dating back to 2012 and 2013-era experiments proposed on BitcoinTalk to enable "BTC-backed alternative cryptocurrencies" or ideas like Fidelity-bonded ledgers proposed by Peter Todd on the bitcoin-development mailing list. A number of different developments came to head and the current iteration of sidechains were advanced in a 2014 paper Enabling Blockchain Innovations with Pegged Sidechains written by Blockstream developers.

In many ways, the reasons behind these explorations are exactly why sidechains make sense today: allowing for novel use-cases of Bitcoin (or other public blockchains) that leverage the benefits of an existing base layer chain, e.g. liquidity (of BTC as a global money) or security (of the Bitcoin ledger). While Bitcoin may best serve the use case of an uncensorable secure money system, for users who are willing to accept potential trade-offs around UX or security, sidechains serve as a potential alternative technology implementation that offers feature parity and sometimes even new capabilities without the need for an additional token.