Will Drivechain Centralise Bitcoin? with Shinobi (SLP512)
Sep 14, 2023
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Shinobi, Technical Editor of Bitcoin Magazine, joins Stephan Livera to discuss the criticisms of Drivechain. They cover topics such as miner centralisation, re orgs on sidechains, Stratum v2, and other soft fork ideas. They also explore multi party channels and the importance of developing with what we've got.
Drivechain introduces potential miner centralization and incentive issues, raising concerns about concentration of power.
The risk of reorgs on drivechain side chains creates an asymmetry of risk, disincentivizing non-miner participation.
Drivechains could introduce Miner Extracted Value (MEV) to Bitcoin, leading to increased centralization and potential chain splits.
Prioritizing non-custodial solutions like CTV, Arc Payment Pools, and APO can enhance security and accessibility, promoting self-custody.
Constructive criticism and addressing concerns through rough consensus are crucial for progress and benefiting the Bitcoin ecosystem.
Deep dives
Miner Centralization and Incentives
One major critique of drive chains is the potential for miner centralization and incentive issues. With drive chains, miners have the ability to take some of the rewards for themselves, leading to a concentration of power. The design goal of blind merge mining was to allow miners to collect fees from side chains without having to actively participate in them. However, this can lead to a situation where miners find it economically necessary to perform all the side chain-related tasks themselves, undermining the original purpose of blind merge mining and creating centralization pressures.
Reorgs and Risk for Non-Miners
Another concern with drive chains is the risk of reorgs on side chains, specifically for non-miners participating in the system. If a miner mines a side chain block and then later reorgs it, they can not only take away potential revenue from the non-miner, but also any funds that were locked up and committed to that side chain block. This creates an asymmetry of risk, where non-miners have more at stake and face greater potential losses than miners, further disincentivizing their participation.
MEV and Lessons from Ethereum
A significant similarity with the Ethereum ecosystem is the issue of Miner Extracted Value (MEV). Drive chains could potentially introduce MEV to the Bitcoin network, leading to adverse effects such as increased centralization and potential permanent chain splits. Learning from the Ethereum experience, where they are struggling to mitigate MEV-related problems and maintain decentralization, it is crucial to approach these issues with caution and not rush into introducing more outside influences into the Bitcoin ecosystem.
Importance of Non-Custodial Solutions
An alternative solution to drive chains is to focus on improving non-custodial solutions using simple and safe primitives like Check Template Verify (CTV), Arc Payment Pools, and APO. These proposals open up new design possibilities for second-layer solutions that can be anchored and enforced by the Bitcoin base layer, enhancing both security and efficiency. Rather than relying on custodial solutions, which drive chains essentially are, prioritizing the development and implementation of non-custodial options can promote greater self-custody and ensure that the benefits of Bitcoin's decentralization are accessible to a wider audience.
Resisting Change and the Importance of Rough Consensus
There is a divide within the Bitcoin community between those cautious but open to new ideas and those staunchly resistant to any change. While constructive criticism and concerns are essential for the development process, continued obstinacy without genuine effort to understand and address concerns is a hindrance to progress. Rough consensus, where concerns are addressed and problems are mitigated, is the basis for moving forward and implementing changes that benefit the Bitcoin ecosystem.
The Challenge of Self-Custody
The ability for individuals to self-custody their Bitcoin holdings is a crucial goal for the long-term success of Bitcoin. While technology limitations may prevent widespread self-custody at present, it remains a significant problem to solve. The aim should be to enable more individuals to become their own banks and have direct control over their funds, ensuring that the benefits of Bitcoin's properties, such as censorship resistance and neutrality, are truly accessible to all.
The Need for Future Improvements
Looking ahead, it is vital to explore and consider future improvements, such as zero-knowledge proof systems, which can provide trustless pegs and enhance non-custodial solutions. Emphasizing advancements in non-custodial capabilities rather than custodial ones like drive chains can drive innovation in building on top of Bitcoin and expanding its capabilities while maintaining its core principles.
Conclusion
While drive chains have been a topic of debate, concerns about miner centralization, reorg risks, MEV, and the focus on custodial solutions highlight the need to approach scalability and innovation in a careful and thoughtful manner. Prioritizing non-custodial solutions, addressing concerns through rough consensus, and working towards enabling widespread self-custody can help ensure Bitcoin's long-term success as a decentralized and empowering financial system.
Miners and their ability to front-run transactions
Miners have the power to manipulate transactions in their favor by dropping someone else's transaction and creating a version of themselves doing the same transaction. This gives them a unique revenue stream and control over what transactions are included in a block. The danger here is that this creates a centralized power dynamic, where only a select few who understand these nuances can exploit this revenue source.
Mining pools exploring new streams of revenue
Mining pools are actively looking for new ways to generate revenue, just like the Ethereum mining pools that are exploring MEV (Miner Extractable Value) opportunities. For instance, Luxor bought Ordinals Hub to explore revenue from the Ordinals ecosystem, and F2 pool is front-running stacks miners, capturing the value themselves. If MEV opportunities emerge in Bitcoin, mining pools will likely explore them, risking further centralization and potentially undermining the original goals of Bitcoin.
Drivechain is a proposed soft fork that has faced a lot of criticism in the community, and Shinobi (Technical Editor of Bitcoin Magazine) joins me to discuss his critiques of the idea. We discuss:
