In late November 2019, the Bitcoin-based DApp network Echo announced[1] the launch of a Bitcoin sidechain on its blockchain testnet. It framed the release as a critical step in its mission to establish decentralized financial applications that leverage BTC as a native asset for lending, trading and more.
“The launch of the Bitcoin sidechain on Echo testnet is the first step towards building the most trust-minimized sidechain for Bitcoin in existence,” Alexei Dulub, founder and CEO of PixelPlex, the blockchain development firm behind Echo, told Bitcoin Magazine. “Getting BTC into the network trustlessly is the hardest technical problem to solve to reach that vision, but this first release is a giant step towards reaching that goal.”
While Dulub describes his team as advocates for Bitcoin Core, Echo sees a need to develop a sidechain that allows users to do more with their BTC.
“Projects like MakerDAO, Uniswap and Compound allow users to borrow against, trade and lend assets on Ethereum without a central party,” Dulub explained. “We want to bring similar functionality to the most trusted, secure and liquid cryptocurrency, BTC.”
PoWR and the Echo Sidechain Difference
Of course, there are other sidechain projects that promise to bring more functionality to Bitcoin while leveraging its security and trustlessness — most notably, Blockstream’s Liquid[2] and IOV Labs’ RSK[3]. These operate through a “federated” consensus model in which a small group of nodes serves as signatories for transactions, enabling these sidechains to utilize BTC as an underlying asset without having to achieve the full consensus required on the main blockchain. This means that users must trust this federation to act in good faith, a trade-off that has inspired a different approach from Echo.
“Echo’s design aims to minimize the trust required
