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Instead of increasing the functionality of the main ledger, Ripple’s creators say that employing federated sidechains would assist maintain the blockchain’s leanness and efficiency for payments.
Ripple’s engineers have been responding to criticism and recommendations to expand the XRP Ledger, or XRPL, to include features such as smart contracts. The latter have become a prominent component of the thriving decentralised financial industry, but Ripple’s founders argue that a different strategy is preferable for the payments-focused XRPL.
This solution comes in the form of what they term “federated sidechains” i.e. parallel ledgers that can support developers’ experimentation and specialized interests, whether for DeFi or other use cases. Using sidechains can leave the main XRPL streamlined and efficient while expanding the functionality of the wider XRP ecosystem by offering interoperability for native smart contracts and other features.
Ripple’s authors propose a piece of “federator” software, connected on one end to the XRPL ainnet and on the other to one or more sidechains, to ease this interoperability. Each of them operates as its own blockchain, but they rely on XRP as their primary asset; also, the federation system facilitates the movement of XRP and issues tokens between them and the main ledger.
Validators with at least one sidechain will be able to execute the federator software. Ripple claims that integrating this new software requires just “two trivial changes” to the XRPL network’s functionality. New capabilities in the XRPL server software will enable it to run in a side chain, however these functionalities will not be available on the mainnet. Ripple chief technical officer David Schwartz elaborates on the federated system:
“Each sidechain would have a ‘trust’ account on the XRPL Mainnet. This account can hold assets on the XRPL on behalf of users of the sidechain. The account would use a multisign or threshold key with the signers being the validators of the sidechain. Each sidechain validator operator registers a signing key that signs transactions on XRPL; thus, the validators of the sidechain can collectively create transactions to manage the sidechain’s Mainnet account.”
Each sidechain has the option of using XRP as its native asset or creating its own unique native asset. In the first situation, the side chain’s mainnet account will keep its whole XRP holdings in trust for usage on the sidechain. In the latter case, the mainnet account of the sidechain may be utilised to create the new, native asset on the XRPL Mainnet.
According to Schwartz, the benefits of the federated system include its low-risk approach, horizontal scaling capability, simple support for new blockchain experiments, and a long-term vision that can accommodate a developing toolset and continual input on new sidechain advancements.
As previously noted, sidechains have become a popular way for blockchain developers to test innovative solutions to scalability problems and introduce new functions into existing blockchain ecosystems such as Ethereum.