What is Drivechain? A Detailed Beginner's Guide
Drivechain is a project that seeks to leverage sidechain technology in order to introduce additional functionality to Bitcoin. The project aims to achieve this by using pegged sidechains, which would allow any individual to move their bitcoins to a variety of pegged blockchains. This would result in a scenario in which one would be able to move their bitcoins to, for example, a pegged sidechain that supported smart contract technology, or a pegged sidechain that employed privacy technology such as ring signatures. The relationship between the mainchain (which would be the Bitcoin blockchain) and the pegged sidechains is that transferability of bitcoins would be bidirectional. Thus, one would be able to transfer their bitcoins from the mainchain to a pegged sidechain and back. The Drivechain project hopes to give bitcoin holders access to new and innovative cryptocurrency systems using the asset that they already own, bitcoin.
What are Sidechains?
At a fundamental level, sidechains are a mechanism that allow for the cross-communication of multiple blockchains. Sidechains can essentially be broken down into two forms. In the first case, sidechains can function as a mechanism that enable two existing stand-alone blockchains to communicate. In this instance, any of the two blockchains can be regarded as being the sidechain of the other, meaning that they can effectively be treated as equals. In the second case, a sidechain can be seen to be the ‘child’ of an existing blockchain, with this existing blockchain being regarded as the mainchain or parent blockchain to the child sidechain.
Interactions between blockchains in a sidechain architecture can vary. One interaction between blockchains in a sidechain system is the transfer of assets from one blockchain to another. In this interaction, the identity of the transferred asset is maintained, in that it is not transformed into a different class of asset. As a result, this asset, even though it has been transferred to another blockchain, can retain its value and may also be transferred back to the original blockchain it came from. This ability to fluidly move assets back and forth between two blockchains, and all the while maintain the value of the transferred asset, is often referred to as a 2-way peg.
Value Offering of Sidechains
The Drivechain project seeks to leverage the value offering that can be captured in a sidechain system in solving the challenges currently facing Bitcoin. Some of these challenges are as follows:
- There is a clear trade-off that exists regarding the Bitcoin blockchain: scalability and decentralization. For example, supporting larger block sizes would enable the network to handle a higher transaction rate. However, this would introduce a centralization risk, as the cost of being a validator would become more expensive, which could result in a scenario in which only a few validators, that possessed enough resources, were securing the network.
- The upgrade path for Bitcoin can prove to be challenging, in that broad consensus amongst stakeholders in the ecosystem is required before changes can be made to Bitcoin. The need for broad consent to be first acquired before additional functionality can be introduced to Bitcoin limits individuals’ autonomy over their own coins. Some people are unable to implement their own features because they lack the necessary consensus.
- Bitcoin’s singular purpose is to facilitate the transfer of value in the form of its native digital asset. However, there are assets besides currencies that can be transferred on blockchains, such as: stocks, bonds, property and much more.
The value add that can result from a sidechain system, in tackling these challenges, include:
- Scalability – sidechains can be used to lighten the load of the Bitcoin blockchain in terms of the number of transactions that are processed. This could prove to be a significant step in birthing a blockchain-based ecosystem that can support millions of users.
- Upgradability – as mentioned earlier, the upgrade path for Bitcoin can be a challenging one due to the requirement of broad consensus. However, the use of a child sidechain, which would be created from a parent chain (in this case Bitcoin), could be a viable way of exploring new technological features not imagined when Bitcoin was first developed. For example, the use of child sidechains could bring new features such as ring signature and smart contract functionality to Bitcoin.
- Asset diversification – the introduction of sidechains could also result in the emergence of a Bitcoin ecosystem that is able to support value transfer that is not limited to digital currency. Instead, extending its reach to encompass a wide range of asset classes.
Drivechain and 2-Way Peg
As mentioned before, there are two forms that a sidechain system can exist. Drivechain intends to utilize sidechains such that they are child sidechains of a parent chain, which would be the Bitcoin blockchain. Central to the sidechain architecture proposed by Drivechain is the 2-way peg, which would allow for the movement of bitcoins from the Bitcoin blockchain to a sidechain and back. It is important to note that, in the vision laid out by the Drivechain team, the identity of the asset being transferred, which in this case is bitcoin, is retained and never transformed into another digital currency.
The 2-way peg functions by first requiring a user to transfer bitcoins to a special output on the Bitcoin chain that can only be unlocked by a SPV proof of possession on the sidechain. When a user wishes to transfer their bitcoins back to the Bitcoin blockchain, they perform the same steps required with the original transfer. They send the bitcoins currently on the sidechain to a SPV-locked output, produce a SPV proof verifying that this action took place, and then use the SPV proof to unlock the number of previously-locked outputs that contain an equal denominated amount of bitcoins on the Bitcoin chain.
A SPV proof, or simplified payment verification proof, is a DMMS (dynamic-membership multi-party signature) that an action occurred on a Bitcoin sidechain. A SPV proof is effectively comprised of a list of block headers demonstrating proof of work, and also a cryptographic proof that an output was created in one of the blocks in the list. A SPV proof allows a verifier to check that some amount of proof of work mining has been committed to result in the existence of an output. SPV proofs ensure that verification, as to the transfer of bitcoins by a user to and from blockchains, can take place.
Drivechain Hashrate Escrow
Drivechain is formed of two critical components: hashrate escrow and blind merged mining. A hashrate escrow functions similarly to a 2-of-3 multisignature escrow, however, with a hashrate escrow, the third party (who will be responsible for arbitrating any disputes) is a decentralized group of Bitcoin miners. This third party will, instead of signing an escrow-withdrawal transaction with a private key, do so instead by directing hashpower over them for a certain period of time. According to the Drivechain team, these hashrate escrows are likely to be ‘asymmetric sidechains’ of Bitcoin. The 2-way peg described previously can be thought of as being a ‘symmetric 2-way peg’, because the transfer mechanism from the Bitcoin chain to the sidechain were identical, both had SPV security. However, with an asymmetric 2-way peg, users of the sidechain would be full validators on the Bitcoin chain, and transfers from the Bitcoin blockchain would not require SPV proofs, as validators would be already aware of the state of the Bitcoin chain. However, in the case of the sidechain, the Bitcoin chain would be unaware of the sidechain, thus, SPV proofs would be required to initiate a transfer back to the Bitcoin chain.
Drivechain Blind Merged Mining
The second component comprising Drivechain is blind merged mining, which is a variant of merged mining. Merged mining is the process of reusing proof of work solutions from a parent cryptocurrency as valid proofs for one or more child cryptocurrencies. Since a miner would be utilizing hashing power on one or more child cryptocurrency networks, they would be entitled to the rewards on these blockchains. Merged mining was introduced as a solution to the fragmentation of mining power among competing cryptocurrencies. Instead of fragmenting mining power, smaller cryptocurrency networks can benefit from merged mining in the form of increased mining power, which allay concerns of security that is often levied against smaller cryptocurrency networks.
Blind merged mining is intended to address two drawbacks found with traditional merged mining:
- Miners must run a full node on the child chain.
- Miners are paid on the child chain and not the parent chain.
With blind merged mining, a miner on the parent chain can mine on a sidechain without having to do any validating on the sidechain. Drivechain introduces a novel type of transaction, where the sidechain node wants the mainchain miner to include, what the Drivechain team describes as a ‘critical hash’, into the coinbase of a mainchain block. Inclusion of the critical hash into the coinbase would signify that the sidechain block would have been successfully merge-mined. If a sidechain node can successfully merge-mine their block, they can claim the block reward on that sidechain. The mainchain miner is paid by the sidechain node when the sidechain node requests for the critical hash to be included in the coinbase of the mainchain block. This solves the issues identified with traditional merged mining, as miners on the mainchain do not have to run a full node on the child sidechain, and are also compensated for their services in bitcoin, the native asset of the mainchain.