2.3 k views

Drivechain: The Bitcoin Upgrade to End All Altcoins?

Bitcoin, the world’s first cryptocurrency, regularly faces criticism for having ‘outdated’ tech and a tendency to evolve slowly relative to the rest of crypto. This leaves altcoin projects looking to build on Satoshi’s original invention room to differentiate and compete through added features, such as faster throughput, smart contracts, and tokenization. 

However, a hotly-debated Bitcoin upgrade called “Drivechain” seeks to introduce these benefits to Bitcoin by opening up its development possibilities in one fell swoop. So what is Drivechain, its benefits, and what are the potential downsides?

What is Drivechain?

“Drivechain” – defined in BIP 300 and BIP 301 – is a proposed Bitcoin soft fork allowing users to create sidechains freely. 

Sidechains are separate blockchains pegged 1:1 with the Bitcoin network, allowing users to send their BTC to and retrieve their BTC from the sidechain at any time. 

According to drivechain.info, these novel sidechains maintain their Bitcoin peg differently from sidechains of the past.  For example, they use neither a federated peg nor verifiable proofs but instead a “conjecture-and-refutation” model:

“A “bundle” of transfers is asserted, and then slowly “ACKed” over time. After three months of ACKing, the bundle succeeds. Thus, the SC:BTC market price cannot deviate significantly from a 1:1 ratio.” the site states. 

For Drivechain to work, Bitcoin users (nodes) only need to enforce simple rules in BIP 300 and BIP 301. Meanwhile, sidechains can be validated by separate software while being completely ignored by mainchain nodes and enforcing different rules from the original Bitcoin network.

Countless sidechains can be created, thus allowing Bitcoiners to transact in many new ways with their BTC. Meanwhile, Bitcoiners that wish to stick to the tried and true rules of the main chain can continue to do so. 

Benefits of Drivechain:

Here’s a summary of the biggest benefits Drivechain has to offer.

Scalability

Bitcoin’s base layer processes transactions relatively slowly due to its 1-megabyte block size limit and 10-minute block speeds. This makes for slow confirmation times and overburdensome fees when the network gets congested, inhibiting Bitcoin’s daily payment usability. 

Taking transaction throughput off the base chain and onto a sidechain can help transactions process faster and more cheaply. This is especially true if a given sidechain uses larger blocks / faster block times. In conjunction with other layer 2 solutions like Bitcoin’s lightning network, Bitcoin’s feasibility as a medium of exchange is further enhanced

Privacy

Drivechain allows for more flexible blockchains with better privacy guarantees or permissioned access. In some contexts, that’s an advantage over the mainnet – which publicly tracks the movement of every BTC transaction.

Such sidechains can be used for institutional or enterprise applications that require differing tradeoffs. An example of an existing sidechain offering similar benefits is Liquid. 

Functionality

Drivechain can bring features and functionality to the Bitcoin network that has grown historically popular with its greatest competitor, Ethereum. That means a sidechain can feature the more complex transaction types like those seen in Ethereum’s DeFi ecosystem, expanding Bitcoin’s use case as decentralized money. An existing sidechain offering this use case would be Stacks.

Alternatively, a sidechain similar to Rootstock could be recreated, enabling the tokenization and NFTs on Bitcoin, creating a much more expansive blockchain-based economy. 

Security

Sidechains can boost Bitcoin’s security by providing greater incentives to Bitcoin miners through transaction fees. The effect of a more flexible, feature-rich network on the blockchain’s security budget is clear when comparing Ethereum’s fee revenue to that of Bitcoin in its current form. 

A thriving fee market will ensure Bitcoin’s hash rate security remains high even as its block subsidy declines over time. 

Risks of Drivechain

Here are some of the arguments of those against implementing Drivechain.

Privacy

Privacy is a double-edged sword. It enhances user freedom. However, creating private and permissioned blockchains may also help facilitate illegal transactions. This would make it harder for regulators and law enforcement to track criminals. 

Complexity

Part of Bitcoin’s appeal is its simplicity and focus on being money. However, adding more complexity to the protocol can make it more difficult for new users to understand and navigate. It can also be a source of infighting about what Bitcoin should be. This would harm Bitcoin’s stability and network effect, possibly resulting in a network split. 

Security Risks

The added complexity of sidechains could also make them vulnerable to the many hacks and thefts associated with DeFi on other blockchains today. Last year, hackers stole over $3 billion via multiple DeFi exploits. 

Centralization

Bitcoin live price
Btc
Bitcoin
$27.941
price
0.89264%
price change
TRADE NOW

Sidechains will likely be far more centralized than Bitcoin’s main chain regarding security, node count, and the developer ecosystem. If a sidechain becomes popular, it increases the risk for its users when its central authority starts acting against their interests.

Stay up to date with our latest articles

More posts

What You Need to Know About Bitcoin Ordinals

Bitcoin Ordinals are digital assets inscribed on a satoshi, the smallest denomination of a Bitcoin (BTC). This strategy allows users to create Non-Fungible Tokens (NFTs) on the Bitcoin blockchain. NFTs are unique digital assets representing art, collectibles, and more. Ordinals have become popular due to their ability to provide an extra layer of security and decentralization for Bitcoin transactions. This has caused a surge in Bitcoin network development, making it easier for users to store assets securely. The Ordinals protocol…

Drivechain: The Bitcoin Upgrade to End All Altcoins?

Bitcoin, the world’s first cryptocurrency, regularly faces criticism for having ‘outdated’ tech and a tendency to evolve slowly relative to the rest of crypto. This leaves altcoin projects looking to build on Satoshi’s original invention room to differentiate and compete through added features, such as faster throughput, smart contracts, and tokenization.  However, a hotly-debated Bitcoin upgrade called “Drivechain” seeks to introduce these benefits to Bitcoin by opening up its development possibilities in one fell swoop. So what is Drivechain, its…

Top 10 Ways to Earn Free Bitcoin in 2023

Here are the best ways to earn free Bitcoin when your wallet is light. Are you interested in Bitcoin but still want to refrain from investing money? Alternatively, are you looking to stack every sat possible without the dry powder to buy more? Here’s a secret: you can put more bitcoin in your pocket without spending a dime – or even doing real work.  That’s not to say you’ll earn much bitcoin without either. After all, if Bitcoin weren’t hard…

What is Taro? Trading Assets and Currencies on Bitcoin

Taro leverages Bitcoin, lightning, and Taproot to enable the peer-to-peer transfer of currencies and assets beyond BTC. —  Are you worried that Bitcoin is too boring to play in the growing digital asset economy? Fret no longer.  Using Taro, the original blockchain network can support the decentralized exchange of multiple assets – including fiat currencies. Moreover, the protocol works with the lightning network, letting users transact – instantly and for free – with non-BTC-denominated balances.  Please read below to learn…

What is Fedimint? The Custody Solution to Bitcoin Privacy

Fedimint combines distributed custody with blind-signed ecash tokens to let Bitcoin users transact privately. --- Despite its growth, Bitcoin still needs some limitations to reach mass adoption as a fully censorship-proof payment network. One of them is privacy. Bitcoin’s ledger is open and public, meaning anyone can track another person’s transactions if they know his public address.  The other is a custody problem. While wallet software UX has improved considerably, many Bitcoin holders still store their assets with custodians,  exchanges,…

Ultimate Beginner Guide to Bitcoin Improvement Proposals (BIPs)

Bitcoin Improvement Proposals (BIPs) are essential tools in the crypto community. They allow the Bitcoin community to propose and vote on the Bitcoin Core software changes.  BIPs can also work for other wallets/services and have a process for development and implementation. This guide will explore what BIPs are, how they work, and some of their benefits and risks. What are Bitcoin Improvement Proposals (BIPs)? Bitcoin Improvement Proposals (BIPs) are proposals for changes to the Bitcoin protocol. Anyone can submit them,…

How Much Bitcoin Does Satoshi Nakamoto Own?

Satoshi Nakamoto – Bitcoin’s anonymous founder – may be the largest Bitcoin whale on the planet. However, there’s no evidence that Satoshi has or will spend his coins. The crypto community isn’t sure how many coins belong to the founder. Just how rich is the father of Bitcoin? And what implications could his ancient stash have for the network and the asset? The Patoshi Pattern One of the most popular theories is that Satoshi Nakamoto mined anywhere from 750,000 to…

What Are Bitcoin Covenants? A Guide to a Controversial Proposal

The proposal to implement Bitcoin covenants has spurred a fiery debate in the Bitcoin community, dividing people on the subject. On the one hand, covenants could make Bitcoin safer and more scalable. But conversely, others see it as an attack on the network’s decentralized, anonymous, and censorship-free nature. While experts unravel the implications of covenants for Bitcoin, we look closer at the proposal and how it could work. This guide to Bitcoin covenants should help clear the air if you…

Intel’s Blockscale – A New Bitcoin Mining Chip

Earlier this month, Intel announced Blocksale ASIC, the company's second-generation Bitcoin mining chip. Intel plans to deliver the new chip for the third quarter, which it claims will be more energy-efficient. What does this news mean for Intel and the blockchain sector? How will Bitcoin miners react? Intel’s Second Attempt to Attract Crypto Miners Intel's first mining chip, Bonanza Mine, is a 7nm process packed in lots of 300. So we can speak of a 3,600W mining machine with up…

SegWit2x – What is It and How Does It Work?

SegWit2x (“B2X” or “S2X”) was a failed, controversial Bitcoin hard fork effort aimed at doubling the block size limit. Some people in the BTC community went as far as to label this proposal as a “Corporate Takeover.” Over 80% of miners supported SegWit2x, but the community could not agree on the upgrade. Nevertheless, we can all learn several things from this story, as we will explain in the article. The difference between a “Soft Fork” and a “Hard Fork.” Before…