Can State Channels or Sidechains Effectively Manage the Real-Time Data Feeds Required for Exotic Derivatives?

State channels are highly effective for managing real-time data feeds between a small, fixed number of participants, making them suitable for bespoke, bilateral exotic derivatives. However, they are less effective for products requiring a broadcast to a wide market.

Sidechains, being separate blockchains with their own consensus mechanisms, can be custom-built for high throughput and can process real-time data feeds efficiently for a broader set of users. The main challenge for sidechains is ensuring the security and trustworthiness of the bridge connecting them to the main chain, as this can be a point of vulnerability.