Altcoin.io, a company developing a new decentralized exchange app has announced the development of a new sidechain to increase capacity. To do this, the team has announced a partnership with Tendermint, a consensus technology that’ll operate a Proof-of-Stake (PoS) mechanism for nodes in the Altcoin.io DEX.
Each node will sign transactions and commit them to blocks. Currently, Tendermint can handle up to 10,000 transactions per second, and as Altcoin.io only commits transactions for its DEX, this will massively improve transactional capacity without sacrificing security.
When implemented, users trading through Altcoin.io will effectively be trading on a sidechain that reports to a smart contract on Ethereum. The smart contract is there to ensure everyone in the sidechain, including Altcoin.io, plays by the rules. Trading will be trustless, near instant, and the DEX will have an in-built mass-exit function to ensure that if verifiers spot fraudulent activity, users won’t lose their funds.
Regarding their next steps, the Altcoin.io team said, “Soon we will enable testnet trading and will be releasing the Altcoin SDK to advance and power potentially 100s of other DEXs.”
The Altcoin sidechain is an idea similar to Plasma, which was introduced by Vitalik Buterin (Ethereum) and Joseph Poon (Lightning Network) in their white paper, Plasma: Scalable Autonomous Smart Contracts.
In its most simplified form, Plasma is a design philosophy for off-chain applications. Plasma’s goal is to scale Ethereum to transact billions of actions per second (instead of just 10–15) by building a blockchain within a blockchain and removing the need for every node on the network to verify all transactions as they occur.
By splitting a blockchain by transaction type (DEX, dApp, social network, and so on), you can increase the transactional capacity in proportion with the number of divisions. For example, you could create a sub-chain on Ethereum for a DEX, operating independently on a Proof-of-Stake consensus mechanism, that effectively doubles transactional capacity. Three chains would triple it, four quadruples it, and so on, ad infinitum (in theory).
The state of each sub-chain is enforced by its “parent” or “root” chain, but it doesn’t need to do anything unless there’s proof of fraud, which is another reason why Plasma can support so many transactions. To withdraw funds, traders wait a predetermined period of time to ensure other nodes can challenge any fraudulent activity. In the case of proven fraudulent behavior, Plasma will trigger a “mass-exit”, which allows users to withdraw their funds from smart contracts (after proving ownership from the last legitimate block in the chain) while the fraudulent block is reversed.
There’s theoretically no limit to the number of sub-chains, so Plasma solves the scalability problem while still providing a secure, decentralized trading environment.