Bitcoins are stored in the public ledger, the bitcoin blockchain. The bitcoin blockchain stores all of the bitcoin transactions and is shared across many computers. Sidechains are Blockchains that are interoperable with each other and with the Bitcoin blockchain. In case a sidechain would break, the damage would only be in that particular sidechain. Sidechains could avoid liquidity shortages, market fluctuations, fragmentation, security breaches and fraud sometimes associated with altcoins. Very promising technology. In short, we may see a whole range of innovations in the bitcoin space. What’s out there?
How Sidechains fit into the big picture. from bitcoinmagazine.
Blockstream
Blockstream was founded to develop new ways to accelerate innovation in crypto currencies, open assets and smart contracts. The sidechain would enable coins to be transferred between the blockchain and this chain at a fixed rate. Assets can be transferred in both directions (to the blockchain and to the sidechain), and such type of sidechain is called a two-way peg. An interesting side note: One of the founders, Austin Hill, once said “can’t be evil”, which reminds us of the famous “don’t be evil”, the formal motto of Google. They also proposed this paper : http://www.blockstream.com/sidechains.pdf
http://www.blockstream.com/
Factom
Factom allows Bitcoin 2.0 applications to write unlimited numbers of entries to many distinct Factom chains. Blocks are then used to compute a single hash every 10 minutes, which is stored in the Bitcoin blockchain. This design would allow applications to write transactions faster, at much a lower cost. In addition, it would permit for applications such as proof-of-existence and contracts.
http://factom.org/
Factom