[ad_1]
Bitcoin, the world’s first cryptocurrency, is sometimes criticized for having ‘outdated’ tech and a tendency to evolve slowly, relative to the rest of crypto.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. What is Drivechain, what are 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 freely create sidechains.
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. 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 3 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 as laid out in BIP 300 and BIP 301. Meanwhile, sidechains can be validated by separate software while being completely ignored by mainchain nodes, and enforcing totally different rules from the original Bitcoin network.
A countless number of sidechains can be created, thus allowing Bitcoiners to transact in a plethora of 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, as well as overburdensome fees when the network gets congested, which inhibits Bitcoin’s usability for day-to-day payments.
Taking transaction throughput off of 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 enhanced even further.
Privacy
Drivechain allows for the creation of more flexible blockchains, including ones 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 have 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 put forth by those against implementing Drivechain.
Privacy
Privacy is a double-edged sword: while it enhances user freedom, the creation of private and/or permissioned blockchains may also help facilitate illegal transactions, making it harder for regulators and law enforcement to track down criminals.
Complexity
Part of Bitcoin’s appeal is its simplicity and focus on being money. 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 is supposed to be, harming 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, over $3 billion in value was stolen across multiple DeFi exploits.
Centralization
Sidechains will likely be far more centralized than Bitcoin’s main chain, in terms of security, node count, and the developer ecosystem. If a sidechain popularizes, there’s immense risk for users of that chain if its central authority starts acting against their interests.
[ad_2]
Source link