Virtualchain is a Python library for processing and maintaining virtual blockchains.

A virtual blockchain is a layer that sits on top of a blockchain that introduces new functionality and operations without requiring changes to the underlying blockchain. The nodes of the underlying blockchain network are not aware of the presence of virtual blockchains. New operations are defined in the virtual blockchain layer and are encoded in the metadata of valid blockchain transactions. Blockchain nodes do see the raw transactions, but the logic for processing the virtual blockchain operations only exists at the virtual blockchain level.

The rules for accepting or rejecting virtual blockchain operations are also defined in the Virtualchain library. Accepted operations are processed by Virtualchain to construct a database that stores information on the global state of the system along with state changes at any given blockchain block.

In a sense, a virtual blockchain is a state machine on top of an underlying blockchain, and the Virtualchain library can be used to build a variety of state machines. One such example can be seen in the Blockstack Server, which defines a global naming system as a virtual blockchain state machine, and you can use this library to create any type of state machine that you can think of.

One way to think of these state machines is as standalone smart contracts. When defining state machines with the Virtualchain library, programmers have the flexibility and boundless potential at their fingertips that they do when working with a Turing complete smart contract system, and at the same time, once a state machine is defined and operational, developers have the benefits of working with a specialized and operationally-efficient environment.