A sidechain is a protocol that relies on the Bitcoin blockchain for data or security, but conducts its own operations on a separate blockchain. A sidechain can be used to make the most of Bitcoin’s ultimate security while allowing for more block throughput or cheaper transactions.

For example, Blockstream’s Liquid sidechain is federalized rather than decentralized and creates 1 block every 2 minutes as opposed to Bitcoin’s 10 minute block times. Microsoft ION is a sidechain project which implements digital identity and relies on Bitcoin’s blockchain for security.