What Are Drivechains? A Complete Beginner’s Guide

One Digit
Sovryn
Published in
8 min readApr 29, 2024

Drivechains have been extensively discussed within the Bitcoin community, but no conclusion about their implementation has been attained as of yet.

Read on to learn what drivechains are, how they work, and why they are considered controversial.

What Is Drivechain?

Drivechain is a scaling solution proposed through the Bitcoin Improvement Proposals (BIPs) 300 and 301 that aims to improve Bitcoin’s scalability and flexibility while maintaining its core strengths: decentralization, trustlessness, and censorship resistance.

Drivechain plans to achieve this goal using sidechain technology. However, instead of only having a single sidechain pegged to the Bitcoin main chain, Drivechain will enable multiple sidechains (up to 256 in the original BIP) to be linked to the mainchain using a two-way peg bridge system. The bridge will allow users to “move” BTC to and from the main chain.

Although Drivechain uses sidechain technology, the two scaling solutions are not entirely the same.

Generally, a sidechain is an independent blockchain that implements its own consensus algorithm to process transactions more rapidly than the mainchain. It also has its own native asset, and transactions are settled on the parent chain.

Conversely, a drivechain borrows its native asset from the mainchain and uses a consensus algorithm closely linked to that of the parent chain, allowing it to inherit its security. Nonetheless, a drivechain runs parallel to the main chain and uses it as its settlement layer, just like a sidechain does.

Unlike other Bitcoin layers that use sidechain technology, a drivechain requires a protocol change (soft fork), which currently creates an obstacle to its implementation. It also promises to make Bitcoin a dominant blockchain that incorporates many of the features altcoin projects offer today.

What Is LayerTwo Labs?

LayerTwo Labs is the company behind Drivechain. It was founded by Paul Sztorc, the developer who proposed drivechains in 2015 and authored BIP 300 and 301.

Sztorc has also proposed Hivemind, formerly TruthCoin, a P2P prediction market that requires Drivechain implementation to become a reality. He established LayerTwo Labs to promote drivechains.

So far, the company has raised $3 million to boost drivechain development. Anyone can test Drivechain by downloading its launcher on Windows, Mac, or Linux.

How Do Drivechains Work?

Let’s take a look at the different elements of drivechains.

The “Sidechains”

Drivechain supports the operation of up to 256 “sidechains” on the Bitcoin network. Each “sidechain” can have its own “sidechain,” expanding the number of drivechains that can exist simultaneously.

Moreover, every drivechain can operate a brand-new blockchain or an existing one. For instance, the drivechain testnet has “sidechains” for existing blockchains such as ZCash and Monero. Furthermore, each “sidechain” will be operated by nodes whose role is to enforce drivechain rules and create blocks in exchange for transaction fee rewards.

Drivechains are opt-in, meaning Bitcoin users don’t have to utilize them. They can just transact on the mainchain as if the drivechains did not exist.

Hashrate Escrow

Hashrate escrow is a concept described in BIP 300. It says that the movement of BTC to and from the mainchain is controlled by Bitcoin miners, who direct their hashrate power to escrow withdrawals. Users can deposit BTC easily from their Bitcoin wallets to a drivechain. However, withdrawals are delayed for three to six months, depending on how quickly a drivechain achieves the required consensus for a transaction bundle to reach withdrawal finality.

These scores are given through a voting system, where a quorum of Bitcoin miners must participate for the withdrawal transaction bundle to be valid. As a result, miners must work together for at least three months to settle those transactions with finality on the Bitcoin network. This extended withdrawal period aims to minimize theft, double-spending, and transaction reversal to near zero.

Blind Merged Mining

Blockchains with different consensus algorithms, such as Proof-of-Stake and Proof-of-Authority, can be “copied” on a drivechain. However, the recommended consensus mechanism is Blind Merged Mining (BMM) because it allows the sidechain to inherit Bitcoin’s Proof-of-Work (PoW) security. That means drivechains will have the same 10-minute block time as Bitcoin.

BMM is defined in BIP 301 as a mechanism that enables Bitcoin miners to secure drivechains without having to run drivechain nodes. This works by allowing a drivechain node to request a Bitcoin miner to endorse its L2 block in exchange for a portion of the transaction fees the drivechain has earned.

Let’s take a look at an example.

Imagine a drivechain block has 20,000 transactions worth $0.10 each, bringing the total transaction revenue to $2,000. These fees will be paid to a drivechain node called Alice. However, Alice doesn’t run a Bitcoin node, meaning she can’t post the block to the mainchain. She, therefore, creates a Bitcoin transaction (request) to pass on the fees to a Bitcoin miner through an auction system. Let’s suppose a miner named Bob agrees to endorse Alice’s block by confirming the Merkle Root Hash (transaction summary) requested by the Bitcoin mainchain using BMM. Alice will send him the sidechain fees minus her cut in the form of Bitcoin transaction fees.

In BMM, Bitcoin miners are unaffected by what’s happening on the drivechains, shielding the parent chain from any sidechain risks. Note that the drivechain node can make multiple requests until a Bitcoin miner accepts it. A soft fork upgrade is required to create a new type of Bitcoin transaction that will facilitate Blind Merged Mining.

Benefits And Drawbacks of Drivechains

Now, let’s take a look at the advantages and disadvantages of drivechains.

Benefits

  • Could help to transform Bitcoin into a dominant chain in all areas of Web3.
  • Provides extra revenue sources for Bitcoin miners.
  • Brings more utility to the Bitcoin ecosystem.
  • Drivechains are opt-in.

Drawbacks

  • Needs soft fork upgrades to be implemented.
  • The design has raised major concerns in the Bitcoin community.
  • The withdrawal duration is too long.
  • Sidechain block time is the same as Bitcoin’s.

Why Is the Drivechain Proposal (BIPs 300 & 301) Considered Controversial?

Despite being proposed more than seven years ago, drivechains don’t exist yet on the mainnet because BIP 300 and 301 are considered controversial.

The following concerns have been raised by the Bitcoin community.

Miner Votes Aren’t Guaranteed

BIP 300 requires over 50% of miners to vote for withdrawals for finality to be reached. The withdrawal will be stuck if they fail to vote to the required extent. Since funds can’t be redeemed if they don’t reach withdrawal finality, users will lose their money, and no one will want to deposit their money into a drivechain again. Therefore, the uncertainty of whether miners can be trusted to sufficiently vote for withdrawals is a barrier to Drivechain implementation.

Miners Could Steal Funds

Users need to trust miners to honestly control the bridging of BTC to and from the mainchain. The main concern raised with this design is that 51% of the miners may decide to empty the funds of a sidechain and send them to a transaction of their choosing. Others argue that miners could steal from one drivechain to crash the 1:1 peg and devalue BTC. Therefore, without a contractual obligation to preserve users’ funds, miners can steal drivechain funds without any repercussions.

Sidechain Revenue May Be More Attractive

Assuming activities on drivechains pick up more than the mainchain, miners may decide to focus on sidechain transactions while ignoring the less profitable transactions on the mainchain. This can affect users on Layer 1. Eventually, this can negatively impact Bitcoin adoption. So, as the block subsidy declines about every four years, many experts fear that miners may prefer prioritizing earning avenues like drivechains that could potentially offer a higher source of income.

Bitcoin’s Name Could Be Tainted By Association

Some feel that if something goes wrong on drivechains, such as a fund theft, there may be challenges in addressing the issue effectively. As a consequence, Bitcoin’s reputation could be affected in the process and reduce users’ trust. Even though drivechains don’t directly affect Bitcoin, the fear here is that modifying the Bitcoin protocol for a scaling solution that is not foolproof is too risky. Those who have raised this concern believe that the trust and reputation Bitcoin has managed to gather over the years shouldn’t be compromised at any cost.

BitcoinOS: Building a Superchain of Bitcoin Rollups to Transform Bitcoin

While the Drivechain proposal remains in limbo due to the potential risks to Bitcoin, BitcoinOS is trailblazing a new off-chain protocol that will enable interoperability and composability among decentralized applications (dApps) secured by Bitcoin.

And best of all: This solution does not require any soft fork upgrade, making it easy to implement.

BitcoinOS does not negatively affect Bitcoin directly or indirectly. If anything, it promises to add utility to the Bitcoin ecosystem through programmable smart contracts to create a shared economy thanks to interoperable dapps and rollups.

In a nutshell, BitcoinOS offers Bitcoin scalability and flexibility without the complications that a solution like a drivechain presents. This new off-chain scaling protocol is aiming to launch on the mainnet in Q4/2024.

Buy SOV to participate in Sovryn’s Bitocracy and have your say in the new era of scaling Bitcoin with BitcoinOS.

FAQs

What is a Bitcoin Drivechain?

A Bitcoin drivechain is a Layer 2 scaling solution that leverages sidechain technology to scale Bitcoin. However, it requires soft fork upgrades to take place on the Bitcoin network for it to be implemented. Paul Sztorc proposes the necessary changes in BIP 300 and BIP 301. The two proposals have been pending for years since Bitcoin developers have not reached a consensus about their execution.

What is the difference between a Sidechain and a Drivechain?

A sidechain is an independent blockchain with its own consensus mechanism and native asset. It runs parallel to the parent chain and is linked via a two-way peg bridge system. Similarly, a drivechain runs parallel to the parent chain and has a different consensus mechanism. However, the consensus algorithm is closely connected to the parent chain’s, allowing it to inherit its security. Additionally, a drivechain doesn’t have its own digital asset because it borrows the main chain’s native coin.

What is BIP 300?

BIP 300, or Bitcoin Improvement Proposal 300, is a concept that describes the two-way peg bridging system from Bitcoin to a drivechain and vice versa. The proposal suggests a system that uses Bitcoin miners’ hashing power to validate escrow withdrawals. The BIP is, therefore, called hashrate escrow. A certain voting score must be achieved within the voting window.. Otherwise, withdrawal transactions will not attain finality.

What is BIP 301?

BIP 301, also known as Blind Merged Mining (BMM), is the proposed consensus algorithm for drivechains. It is connected to Bitcoin’s Proof-of-Work, so miners’ involvement is required. However, BMM doesn’t need miners to run the node of a sidechain to secure it like merged mining. Instead, miners can secure a drivechain and endorse its blocks by accepting a BMM request from a drivechain node. If they accept the request, the drivechain’s block’s transaction fee revenue is passed on to them.

Source: What Are Drivechains? A Complete Beginner’s Guide

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