Explained: How Drivechain captured the attention of the Bitcoin community

Two Bitcoin Improvement Proposals (BIPs), 300 and 301, have overtaken the conversation in the Bitcoin community. Altogether known as Drivechain, these proposals would activate peer-to-peer trustless pegs between Bitcoin and up to 256 side blockchains (sidechains).

Prior to August, a tracker of tweets containing the word “Drivechain” averaged less than a half dozen results per day. Nowadays, there are suddenly thousands of daily tweets about Drivechain.

Sidechains using BIPs 300-301 are funded with BTC and withdrawable into BTC, yet they are entirely separate blockchains with independent rules, operations, and tokens. If the Bitcoin community were to activate these Drivechain BIPs, there could be up to 256 distinct sidechains, each denominated in BTC.

Up to 256 new sidechains running on Bitcoin

Each sidechain could operate any type of blockchain, including copies of existing ones or brand new ones. Indeed, there are already testnet versions of popular blockchains. For example, there are Monero and zCash sidechains in the Drivechain testnet.

Long-time Bitcoin developer Luke Dashjr recently rebased Drivechain’s years-old code and submitted a formal pull request (PR) to Bitcoin developers. It remains a contentious, miner-activated soft fork proposal. Drivechain has failed to attract consensus for activation across the Bitcoin network for years. There is no proposed code for activation nor a Bitcoin Core software client that would support Drivechain in the near future.

The author of the BIPs, Paul Sztorc, has been working on Drivechain since 2015 when he proposed a whitepaper for Truthcoin, a Drivechain-powered prediction marketplace with two tokens, BTC-pegged CashCoins and speculatively-priced VoteCoins. It’s worth noting that neither Truthcoin nor its tokens exist on any mainnets.

Sztorc formally proposed BIP 300 in 2017 and BIP 301 in 2019 to the formal Bitcoin devlist. He’s been promoting Drivechain ever since, and founded a company to promote it, called LayerTwo Labs, which raised $3 million in December.

LayerTwo Labs says the benefits of Drivechains include support for Turing-complete smart contracts, stablecoins, privacy features, low-fee payments, DeFi, and asset tokenization.

Drivechain can (not must) enable speculative altcoins

Drivechain would allow up to millions of altcoins with variable prices to vie for their sidechain’s BTC backing. For example, a Drivechain clone of BNB Chain on would allow millions of Drivechain-cloned BEP20 tokens to trade among speculators vying for a share of the BTC committed to the sidechain.

More conservative sidechains might choose to use only a single, BTC-pegged token. Others might choose to enable millions of speculative tokens. Again, each sidechain chooses its own operating rules.

If Bitcoin were to activate Drivechain, each sidechain would have to first attract 90% of the hashrate during the activation period in order to secure one of Drivechain’s 256 slots. Thereafter, the operators of the sidechain would have to attract mainchain BTC contributions in order to grow the value of their sidechain.

What are sidechains and could they really make altcoins obsolete?

Read more: Bitcoiners respond to Mike Green’s ‘scarcity destroys value’ critique

Quick deposits, slow withdrawals

Depositing into a sidechain is a quick, straightforward process. Deposits are easy because anyone can send BTC from a personal, single-signature wallet into a Drivechain wallet. Simple.

Withdrawing from a sidechain, however, could take as long as six months. Specifically, withdrawal finality requires at least 13,150 miner-upvoted blocks within 26,300 continuous Bitcoin blocks.

This lengthy, cumbersome process is purposeful, according to Sztorc. Withdrawals from a sidechain initiate from Drivechain’s anyone-can-spend wallets and require at least three months of cooperation by miners in order to settle those funds with finality back into the Bitcoin network. This long period of cooperation reduces the risk of transaction reversal, double-spending, and theft to near-zero.

Truthcoin (Hivemind) relies on Drivechain

A few years after its 2015 introduction, Sztorc changed the name of his peer-to-peer prediction marketplace proposal Truthcoin to Hivemind. He proposed a way to “make cheap talk expensive” through monetary wagers on real-world events.

Of course, there already are various forms of prediction markets, including PredictIt, Augur, and Polymarket. Hivemind’s differentiated value proposition is its alleged “unstoppability” due to its Bitcoin-operated sidechain.

Truthcoin’s rebranding sparked yet another debate about Bitcoin sidechains. Some supporters say Satoshi Nakamoto first supported the idea of sidechains. Specifically, Satoshi suggested the idea of merge-mined blockchains that could coexist alongside Bitcoin, share mining power, and experiment with new features. Satoshi mentioned “BitDNS” as an example, an idea that became Namecoin, which still operates today. Vitalik Buterin ported Namecoin onto Ethereum with some modifications like the Ethereum Name Service (ENS).

However, Satoshi seems to have said very little about sending BTC back and forth between mainchain and sidechain, as Truthcoin developer Paul Sztorc proposed when he introduced BIP 300 in 2015.

BIP 300 and drivechains drew some early support from celebrities in the Bitcoin community like Roger Ver. Ver invested in the Truthcoin project in 2015. Their reasoning implies that sidechains could have at least partially solved the “big block” issue that caused the Bitcoin War of 2017.

Yes, because those people would be *users* of the sidechain

DC gives largeblockers what they wanted… (and smallblockers what they wanted)

But only the largeblockers needed to learn about it https://t.co/mgOh9aZmPq

— Paul Sztorc (@Truthcoin) August 30, 2023

Read more: Blockchain dev says DAOs don’t work, elected leaders are the answer

Drivechain claims to be better than federated sidechains

Observers like Digital Cash Network and Human Events writer Joel Valenzuela opined that the current Bitcoin community had a bad habit of rejecting “win/win” solutions like Drivechains and accepting increasingly centralized and custodial solutions like Lightning Network.

Others call sidechains an unnecessary distraction, citing work on two-way pegged (albeit federated and non-peer-to-peer) sidechains like Liquid or Rootstock.

We already have rootstock which has a 2 way peg, EVM compatibility, and merge mining with BTC. Why do we need drivechains? If someone wants a Zcash sidechain, they can create one today. Seems like we have much more important problems to tackle…

— Evan Winget ⚡ (@evanwinget) September 1, 2023
A Drivechain critic points to federated sidechains as competitors.

Skeptics also questioned the long-term fee model for sidechains, questioning why miners would not just steal the sidechain’s BTC backing outright.

Bitcoin Core developer Luke Dashjr said the funds on a drivechain would technically belong to the drivechain miners, who could ignore the rules without a legal, contractual obligation to preserve the BTC for their “real” owners in the sidechain. He said the ability of miners to steal BTC from sidechains makes Drivechain different from protocols like the Blockstream-led Liquid. Blockstream selects Liquid functionaries, who sign literal contracts promising to follow functionary rules.

However, Sztorc countered that fees from operating reliable sidechains — earning transaction fees for the long-term — would benefit miners without them having to forcefully steal the sidechain’s BTC backing.