Scaling for Bitcoin and most cryptocurrencies has been a hot debate for some time, but one group of pioneering developers has already proposed a way to overcome the scaling issue. Rather than scaling the main blockchain, the Drivechain initiative seeks to create what are known as sidechains, which could also be considered softforks of Bitcoin, to give users exactly what they want, without the need to hardfork, or even to create any other cryptocurrencies besides Bitcoin. There are certainly benefits to consider by taking this route, so let’s explore a bit more about what Drivechain seeks to accomplish, and what sidechains can do for Bitcoin.
Are Sidechains Bitcoin’s Future – Drivechain Thinks So
Bitcoin scaling solutions have come and gone, and there is still a great debate over how to scale Bitcoin. One of the leading proposed solutions comes from the Drivechain initiative. Their idea is to use sidechains to add new features and scalability to the Bitcoin network. This would eliminate the need for hundreds of competing cryptocurrencies, and would allow the Bitcoin blockchain to support many different transaction types.
From the Drivechain website:
Problems With Today’s Mono-Chain Setup
- Blockchain technology has economic tradeoffs, and users disagree over the optimal tradeoff. But only one group can have their way at a time.
- Bitcoin investors must worry about competition from other projects (Ethereum, Z-Cash, Ripple).
- Satoshi, creator of Bitcoin, wanted to support many transaction types, but knew that his design was prohibitively inflexible.
- Bitcoin is supposed to be used as money, but if it cannot be used on some networks, it is constrained as a medium of exchange – and therefore at a competitive disadvantage.
Instead, sidechains are alt-chains that all use the same Bitcoin token. They start with zero coins; they accept Bitcoin deposits, conduct Bitcoin transfers, and finally dispense Bitcoin withdrawals.
As you can see, a sidechain has no need to issue its own token. Everything is transacted using Bitcoin, and yet these different features are kept separate from the main blockchain. This keeps the number of Bitcoins the same (unlike hardforks that effectively increase the number of coins in circulation – thus diluting the value). One can deposit Bitcoin on any sidechain and later have that converted to mainchain Bitcoin at any time.
How Many Cryptocurrencies Do We Need
This provides several advantages to the blockchain. First of all it would allow for the creation of a sidechain for nearly any purpose. This eliminates the need for the 1,000+ other cryptocurrencies in existence. Imagine a cryptocurrency world without ICOs and the possibility of fraud (think Bitconnect and other Ponzi schemes).
More importantly, the elimination of these types of fraud, and the distraction caused by hundreds of competing cryptocurrencies would allow for healthy competition, without harming innovation. It isn’t likely all the competing cryptocurrencies would disappear, but the creation of new coins would almost certainly slow. It also means we wouldn’t see additional hardforks to the main Bitcoin chain, as new features could now be added by simply creating a sidechain. Want bigger blocks for lower fees – create a sidechain. Want faster transactions? There could be a sidechain for that too. Privacy, anonymity, microtransactions? All possible with sidechains.
Drivechain Keeps Your Bitcoins Safe
The Drivechain project is also very concerned with security, and has suggested a model that will keep user funds safe at all times. Basically it calls for an escrow account to move funds, whichc can only be opened on special occasions. It will also require miners (who are responsible for the escrow accounts) to leave a memo stating where funds are being transferred to. This should make stealing Bitcoins virtually impossible.
Drivechain should allow for greater innovation and faster adoption of Bitcoin as it clears the playing field of the distractions being caused by the multitude of competing coins. Competition will still exist, but it will all remain with the realm of Bitcoin. Users will also be better off by not being burdened with the need to use multiple platforms and exchanges to make conversions or transfers. Since everything will be Bitcoin based, all the sidechains will automatically be supported by any platform using Bitcoin. Gone will be the need to convert your Bitcoin to another cryptocurrency to conduct a transaction as everything will be seamless. This will cut down on delays, expensive transaction fees, frustrations, and the learning curve associated with cryptocurrencies today.
While it isn’t certain that the community will ultimately use Drivechain as a solution, it certainly is an interesting and in many ways elegant solution to the issues of scalability and security.