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Cardano Sidechain: Architecture & Implementation

Making a sidechain of Cardano is possible, but it’s a highly technical undertaking that involves building a parallel blockchain that connects to the Cardano mainnet via a bridge protocol. Here’s a breakdown of what it takes:

🔹 Core Concepts​

  1. Sidechain Definition A sidechain is an independent blockchain that runs in parallel to Cardano. It has its own consensus rules, tokenomics, and block producers, but is linked to Cardano via a two-way bridge that allows tokens (like ADA or native tokens) to move back and forth.

  2. Base Layer Connection Cardano provides support for sidechains via:

    • Ouroboros family of protocols (consensus that can be adapted for your chain).
    • Sidechain toolkit (IOG has released prototype frameworks).
    • Bridge smart contracts on Cardano that lock/release assets.

🔹 Steps to Create a Cardano Sidechain​

1. Design the Consensus & Chain Rules​

  • You can reuse Ouroboros (Praos, Chronos, Leios, etc.) for security and compatibility.
  • Or implement your own (e.g., Proof-of-Authority, Delegated PoS, or even hybrid consensus).
  • Decide block times, validator set, governance model, etc.

2. Set Up Infrastructure​

  • Deploy nodes/validators that will produce blocks on your sidechain.

  • Choose your execution layer:

    • EVM-compatible (like Milkomeda C1)
    • WASM or custom VM
    • Plutus-based (native Cardano scripting carried over).

3. Implement the Bridge​

  • On Cardano mainnet, deploy bridge contracts that lock tokens.
  • On your sidechain, mirror those tokens as wrapped assets.
  • Users can move ADA or native tokens to the sidechain and back securely.

4. Tokenomics & Governance​

  • Decide if your sidechain has its own token for gas and governance.
  • You may also just use wrapped ADA as the fee token.

5. Interoperability​

  • Enable communication between the sidechain and Cardano using cross-chain messaging protocols.
  • (Example: Milkomeda enables Ethereum-style contracts running with Cardano as settlement.)

🔹 Tools & References​

  • Cardano Sidechains Toolkit (by IOG) → an open-source framework for launching sidechains.
  • Milkomeda → an existing Cardano sidechain providing EVM compatibility.
  • Midnight → IOG’s privacy-focused sidechain (uses zero-knowledge proofs).
  • Hydra → not a sidechain, but a state channel scaling protocol you may integrate if your sidechain needs high throughput.

🔹 Practical Path​

  1. Start with a testnet chain using the Cardano sidechain toolkit.
  2. Decide your execution model (do you want EVM compatibility or stick to Cardano native contracts?).
  3. Run validator nodes and configure bridge contracts.
  4. Integrate wallets and explorers so users can interact.
  5. Deploy dApps or governance experiments on your sidechain.

👉 Sidechains are a big engineering effort: you’ll need expertise in Haskell/Plutus, Rust, or Solidity (if EVM-based), plus infrastructure devops for chain deployment.

🚀 Step-by-Step Guide: Spinning Up a Cardano Sidechain Testnet (Preview)

Generated by AI

0) What You’ll Build​

  • A Partner Chains Substrate node running in PoA mode.
  • Governance & D-Param contracts on the Cardano Preview testnet.
  • Two local validators producing blocks.

1) Prereqs​

  • Linux/macOS with Docker, Git, Nix, and Rust installed.
  • Clone and build the toolkit:
git clone https://github.com/input-output-hk/partner-chains.git
cd partner-chains
nix develop
cargo build

2) Run Cardano Testnet Services (Preview)​

2.1 Ogmios + cardano-node (Preview)​

Run Ogmios using the preview tag:

docker run -it --name cardano-ogmios \
  -p 1337:1337 \
  -v cardano-preview-db:/db \
  cardanosolutions/cardano-node-ogmios:latest-preview

👉 This connects to Preview automatically. Your node DB will persist in the cardano-preview-db volume.

2.2 Kupo (Preview)​

Run Kupo and point it to Ogmios:

docker run -d --name kupo -p 1442:1442 \
  cardanosolutions/kupo:v2.11.0 \
  --ogmios-host cardano-ogmios \
  --ogmios-port 1337

2.3 Get Test ADA​

Request funds from the Preview faucet: 👉 https://docs.cardano.org/cardano-testnet/tools/faucet/

3) Configure pc-contracts-cli​

Install the CLI:

nix run .#pc-contracts-cli -- --help

or via npm:

npm i -g @partner-chains/pc-contracts-cli

Create config.json:

{
  "genesisUtxo": "TXHASH#INDEX",
  "governanceAuthority": "hex-governance-key",
  "runtimeConfig": {
    "network": "preview",
    "ogmios": { "host": "localhost", "port": 1337, "secure": false },
    "kupo":   { "host": "localhost", "port": 1442, "secure": false }
  },
  "paymentSigningKeyFile": "/absolute/path/payment.skey",
  "stakeSigningKeyFile": "/absolute/path/stake.skey"
}

⚠️ Note the "network": "preview" setting.

4) Initialize Governance on Preview​

nix run .#pc-contracts-cli -- init-governance

Set your PoA-style D-Param (2 permissioned validators, no open registrants):

nix run .#pc-contracts-cli -- insert-d-parameter \
  --d-parameter-permissioned-candidates-count 2 \
  --d-parameter-registered-candidates-count 0

5) Generate Validator Keys​

Each validator needs AURA + GRANDPA keys:

cargo install --locked subkey --git https://github.com/paritytech/substrate

# Aura (block production)
subkey generate --scheme sr25519

# Grandpa (finality)
subkey generate --scheme ed25519

6) Whitelist Validators on Preview​

nix run .#pc-contracts-cli -- update-permissioned-candidates \
  --add-candidate "SIDECHAIN_KEY_1:AURA_KEY_1:GRANDPA_KEY_1" \
  --add-candidate "SIDECHAIN_KEY_2:AURA_KEY_2:GRANDPA_KEY_2"

7) Start Partner-Chains Nodes​

Build a chainspec:

./target/debug/partner-chains-node build-spec --chain local > local.json
./target/debug/partner-chains-node build-spec \
  --chain local.json --raw --disable-default-bootnode > local.raw.json

Insert validator keys:

./target/debug/partner-chains-node key insert \
  --base-path /data/node1 \
  --chain ./local.raw.json \
  --scheme Sr25519 \
  --suri "<aura mnemonic>" \
  --key-type aura

./target/debug/partner-chains-node key insert \
  --base-path /data/node1 \
  --chain ./local.raw.json \
  --scheme Ed25519 \
  --suri "<grandpa mnemonic>" \
  --key-type gran

Run nodes:

./target/debug/partner-chains-node \
  --chain ./local.raw.json \
  --base-path /data/node1 \
  --validator --name PC-VAL-1

./target/debug/partner-chains-node \
  --chain ./local.raw.json \
  --base-path /data/node2 \
  --validator --name PC-VAL-2 \
  --port 30334 --rpc-port 9934 --ws-port 9945

8) Smoke Test​

Check chain info:

curl -s http://localhost:9933 \
  -H 'content-type: application/json' \
  --data '{"jsonrpc":"2.0","id":1,"method":"system_chain","params":[]}'

Or open Polkadot.js Apps → connect to ws://localhost:9944.

✅ You now have a PoA-style Cardano-connected sidechain running on Preview.

Would you like me to also prep a ready-to-use Docker Compose file for Ogmios + Kupo + Partner-Chains nodes (all wired to Preview), so you can spin up the whole setup in one command?