Blockstream has announced it will release an open source codebase and testing environment for its signature sidechains project.

Called Sidechains Elements, the launch is the first major release for the bitcoin startup since it published its white paper last fall. According to Blockstream, the code will allow community developers to experiment with sidechain functionality, with initial features allowing users to transact and issue digital assets.

The release comes months after Blockstream raised $21m in seed capital from investors including Reid Hoffman, Google chairman Eric Schmidt’s Innovation Endeavors and Yahoo co-founder Jerry Yang’s AME Cloud Ventures.

In interview, Blockstream co-founder and president Dr Adam Back expressed hope that the release of Sidechains Elements would drive community members to contribute to the initiative.

Back told CoinDesk:

Sidechains are blockchains designed to integrate with the bitcoin blockchain by way of two-way pegs, allowing for the transfer of assets between the two networks. The project has been heralded as a potential solution to bitcoin's perceived scalability issues for its attempt to enable experimentation on bitcoin's code.

Currently, the sidechain made available for developers utilizes testnet coins rather than real bitcoins, and the decentralized peg only allows for two-way transactions between the bitcoin testnet and the sidechain testnet.

According to Back, the release of Sidechains Elements will help contribute to the next phase of development: putting the code into the hands of entrepreneurs and institutions looking to utilize sidechains.

He cited banks in particular as one group of interested parties, which he noted are interested in the ability to issue and distribute assets on the blockchain, as well as provide infrastructure for what Back called “new kinds of markets”.

“This sidechain release and releases and features to follow will be a good implementation point for those kinds of projects,” he said.

Back pointed to the confidential transactions feature as one of the more notable aspects of the release, suggesting that the concept can help bring a new degree of privacy to bitcoin. Those who use the feature would be able to obscure the amount being sent from parties outside of those actively involved in the exchange or selected third parties.

A major step to come is the drafting and submission of a new Bitcoin Improvement Proposal (BIP) that will call for sidechain functionality to be added to bitcoin’s codebase.

If approved, the addition to bitcoin’s code will enable the decentralized two-way peg and the ability to merge-mine sidechains with bitcoin. According to Back, the changes would require a soft fork of the network rather than a hard fork.

The startup is also planning to conduct a Reddit AMA featuring Blockstream co-founder and bitcoin core developer Gregory Maxwell and other members of the Blockstream team following the release.

Numerical image via Shutterstock

Correction:The two-way peg currently allows transactions between the bitcoin testnet and the sidechain testnet, rather than solely from the bitcoin testnet to the sidechain testnet. This article has been updated accordingly.