RV Blog What are Drivechains?

What are Drivechains?

What are Drivechains?

A drivechain is an approach that seeks to leverage sidechain technology in order to introduce additional functionality to Bitcoin. As a matter of fact, drivechains can be viewed as a special type of sidechain. The latter is a term used for blockchains that run side to side of each other, which is why the term sidechain is used. Sidechains usually have their own unique coins, and typically, the sidechain derives its security from the blockchain it runs parallel to. This is the case with Stacks, a project that borrows its security from the Bitcoin blockchain but has its own unique token, called STX.

In the case of a drivechain, the definition revolves around the fact that a drivechain is referred to as a child chain that does not have a native asset but borrows it from the parent chain. The parent chain is the blockchain that the child chain is getting its security from. This is also how RSK works from a high-level perspective. Although RSK is usually just called a sidechain, it would be more accurate to call it a sidechain/drivechain hybrid variant.

So, while the terminology can be very confusing and gets mixed up by different people, the important thing to know is: Whether sidechain or drivechain, both are a way to bring greater expressiveness to Bitcoin because they enable more functionalities on top of Bitcoin, with all the related trade-offs, of course.

Bitcoin and its security budget

Some people consider the concept of drivechains to be essential to Bitcoin. They see drivechains (as well as sidechains) as a necessary driver of transaction fees for Bitcoin miners. Were it not for the adoption of drivechains and sidechains, the Bitcoin miner might one day find themselves in an unprofitable situation, so the argument goes.

To better understand the argument, we have to think about how Bitcoin miners are paid today. As of now, most of their revenue comes from block rewards, which refers to the amount of new Bitcoin that is issued by the protocol as a form of subsidy. This block subsidy is declining at a steady rate until around 2140 when no more Bitcoin units will be released as a subsidy by the protocol itself. By then, miners will fully depend on transaction fees as revenue sources.

Therefore, with the declining block subsidy, transaction fees will increasingly have to compensate for the revenue that miners currently receive in the form of block rewards. And this is where drivechains as well as sidechains enter the picture. Because they allow for more expressiveness, their proponents believe that they will drive economic innovation and use-cases that will eventually create traffic on top of Bitcoin, resulting in transaction fees that will ultimately be paid to Bitcoin miners.

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A free market on Bitcoin

The rationale behind the creation of drivechains and sidechains is to be mindful of the security-budget debate surrounding Bitcoin for years. By some, they are seen as a way to make sure that transaction fees will be enough to pay for security. But not only that. Allowing for drivechains is also seen as a way to reconcile the many ideologically scattered groups within the wider Bitcoin community. Ever since the blocksize war — a long-raging debate about how big or small Bitcoin blocks should be — different ideological groups have emerged wanting to technically pivot the Bitcoin protocol in a certain direction.

With the creation of drivechains, seemingly all of these different ideas could be pursued on separate Bitcoin drivechains. Be it the implementation of zk-SNARKs, higher blocksize, Turing-complete scripts, MimbleWimble, Monero ring signature, or more — all of these things could be done on different drivechains. This way, a free market for the implementation of any kind of ideas into Bitcoin could become a reality.

Making drivechains a reality

In order to make drivechains and all their assumed benefits a reality, two different BIPs will have to be considered. BIP is the short form for Bitcoin Improvement Proposal (BIP) and contains technical specifications on how to introduce changes to the Bitcoin-protocol code. The more important they are and the more influential their consequences are, the more thoroughly and carefully they are discussed within the Bitcoin community.

In the case of drivechains, there are two relevant BIPs that have been proposed:

  • BIP 300: Hashrate escrows
  • BIP 301: Blind merged mining

Hashrate escrow is a drivechain’s concept of moving coins from the Bitcoin blockchain to the different drivechains and back. It functions similarly to a multi-signature escrow as used with projects like RSK or Liquid but instead of having a federation of some sort, the escrow is controlled by a decentralized group of Bitcoin miners. This distributed group of miners is responsible for arbitrating any disputes and is directing hash power towards escrow-withdrawal transactions instead of signing them with a private key as is the case with federations.

Ultimately, the security trade-off with a drivechain is slightly different than with (sidechain) solutions like RSK or Liquid. While with the latter, the transfer of Bitcoin from the mainchain to either RSK or Liquid chain is done through a federation, the two-way pegging mechanism with drivechains would be operated by the miners themselves.

In order to secure the drivechain and the pegging mechanism, a process called blind merged-mining is used. This is a variation from the more general merged-mining that is used with RSK, for example. With this special type of merged-mining, miners don’t need to pay attention to the drivechains at all — meaning they don’t need to run a drivechain node — but can still collect all the transaction fees from them. They simply contract with someone else who is running a drivechain full node.

The need for a soft fork

The question is: Why have drivechains not been created? Technically speaking, for drivechains to be possible, the Bitcoin protocol would need a soft fork to be implemented to Bitcoin, the same way the recent Taproot upgrade needed a soft-fork implementation to be activated. But before any soft forks happen with Bitcoin, the idea proposed must pass the strict scrutiny of the entire Bitcoin community.

With the proposals for drivechains, this has not happened yet. After all, not enough developer mindshare has been dedicated toward the development of drivechains and to exploring all the intricacies concerning the security and the incentive structure of drivechains. From a complexity standpoint, the implementation of drivechains might not be as complex. The tricky part is the game theory, where there are still a few uncertainties that have yet to be clarified and solved. It will be interesting to follow, whether or not critical uncertainties will be solved and the drivechain concept will finally become a reality.