Sidechains have been viewed as Bitcoins way of dealing the altcoin market since 2014, when a proposal for a two-way peg between two different blockchains was first proposed in a public setting. Three years later, it appears that drivechains, which are a specific way of implementing sidechains, will be the way in which extensions for Bitcoin are rolled out.
Sidechains remove the need for altcoins by allowing bitcoins to be effectively transferred from one blockchain to another. This means the bitcoin token can be used on any type of blockchain that bitcoin holders demand into existence.
Drivechains were designed by Bloq Economist Paul Sztorc, who started working on the idea after the lack of progress on sidechains slowed down his own project, a decentralized prediction market known as Bitcoin Hivemind.
In Sztorcs view, the security model for drivechains is not much different than that of the main Bitcoin blockchain because the funds on the drivechain are held in escrow by bitcoin miners. Some developers, such as Peter Todd, have shared technical concerns with merge-mined sidechains in the past, but this concept is likely going to be tried out in the wild, whether the contributors to Bitcoin Core like it or not. Sztorc has also attempted to address these technical concerns through the use of blind merged mining.
In terms of the risk of miners stealing the funds held in escrow, Sztorc has pointed out that a similar risk already exists in Bitcoin: A cartel of miners could theoretically defraud a bitcoin exchange by selling bitcoins on the exchange and then later rewriting the chain history in a way obscures or erases the original deposit so that it appears it never took place.
Drivechains can be added to Bitcoin via soft forks, which means they are backward compatible. If there is sufficient demand for a specific type of drivechain, miners should be happy to mine on the additional chain in order to generate more revenue by way of transaction fees.
Features of popular drivechains could theoretically be soft-forked into Bitcoin by way of an extension block or some other measure, but its unclear if this would even be necessary.
The three main niches that have gained interest from altcoin speculators are microtransactions (lower transaction fees), smart contracts and privacy.
Both Ethereum and Litecoin are said to be useful alternatives to Bitcoin because they have lower transaction fees. One of the first intended drivechains is one with bigger blocks which would allow users to transact with lower fees in a manner that does not negatively affect the decentralization of Bitcoins main chain.
Although its still unclear if there is much substance behind the drastic rise in Ethereums market cap, RSK has built a sidechain focused on complex smart contracts that is a hybrid between a drivechain and a federated sidechain. The RSK platform is currently pegged to Bitcoins testnet, and it is expected to launch on mainnet later this year.
In terms of privacy, there are intentions to add a MimbleWimble sidechain to Bitcoin, although the mechanism that will be used to peg the sidechain to Bitcoin is unclear at this time. In addition to MimbleWimble, its also possible that a Monero, Zcash or other privacy-focused sidechains could be released if there is enough demand.
There is a full list of sidechain projects available on the Drivechain website.
While drivechains are likely to drive out the need for altcoins, its still possible that alternative digital assets that are not attempts at creating a new form of money will exist.
Sztorcs own project creates a new token, votecoin, which is required for the decentralized prediction market to work. With this setup, bitcoin is used as the transactional currency while votecoins are used as a sort of stake in the network to get the incentives to work properly.
To me, its unclear how often these sorts of new tokens will be needed, but there should be no reason for competitors to bitcoin as a form of digital money to exist.
One last thing to keep in mind is that a chain split in Bitcoin could invalidate the hypothesis laid out in this article. If there is a split, then the network effects around Bitcoin could be weakened, which would open the door for an alternative cryptocurrency to take Bitcoins place.
The supporters of the SegWit2x proposal intend to activate a hard-forking increase to Bitcoins block size limit later this year, but it is extremely unlikely that this change will be implemented in Bitcoin Core, which means a chain split is a possibility.
The negative effects of such a situation would depend on the severity of the split and how the market reacts.
If a big block drivechain is prepared in time, it may be able to decrease the attraction some in the Bitcoin ecosystem have toward a hard fork.
Thank you to drivechain developer Patrick Murphy for answering a few questions during the writing of this article.
See the article here:
Op Ed: Drivechains Could Kill Off the Altcoin Market
- Poll Shows Crypto Investors Expect ChainLink To Be Top Performing Altcoin in 2020 - newsBTC - January 14th, 2020
- These 4 Factors Suggest the Altcoin Crypto Market Rally is Only Just Beginning - newsBTC - January 14th, 2020
- Is This The Return Of The Altseason? Pumped Up Altcoins Leave Bitcoin In The Wind - ZyCrypto - January 14th, 2020
- Ethereum Classic Cooperative Warns Public Against Apparent Hard Fork Scam - Cointelegraph - January 14th, 2020
- South Korea: Hacked Crypto Exchange Upbit Finally Resumes ETH Deposits and Withdrawals - BTCMANAGER - January 14th, 2020
- Cobinhood is the Latest Altcoin Exchange to Shut Down - NullTX - January 12th, 2020
- Litecoin Gains 10% Against The Dollar, Is This The Start of an Altcoin Rally? - newsBTC - January 12th, 2020
- Dash Surges by Over 16% as Bitcoin Price Hovers At $8,100 - Cointelegraph - January 12th, 2020
- More Altcoin Mining to be Integrated by Mining Pools in 2020 - Report - Cryptonews - January 10th, 2020
- Ethereum, Monero hashrate mainly concentrated in Europe - AMBCrypto - January 10th, 2020
- 4 Signs the Cryptocurrency Altcoin Market May Have Finally Bottomed - Cointelegraph - January 10th, 2020
- All 4 Past Januaries Started A Different Altcoin Trend, Will January 2020 Ignite a New Altcoin Season? - CryptoPotato - January 10th, 2020
- Dead Crypto Projects Declined in 2019, Are Altcoins Reviving? - Bitcoinist - January 10th, 2020
- Stellar jumps 8% as Bitcoin taps $8,000; what will push XLM even higher? - CryptoSlate - January 10th, 2020
- Chainlink and Loopring Are Now "Partners in Crime" - Business Partnerships - Altcoin Buzz - January 10th, 2020
- Upbit Exchange to Re-Open XRP, LTC and EOS Trading - Bitcoinist - January 10th, 2020
- Altcoin Explorer: Tether, The Worlds First Successful Stablecoin - BTCMANAGER - January 10th, 2020
- Heres What Altcoins Rally Means for Where the Crypto Markets are Heading Next - newsBTC - January 5th, 2020
- Momentum Within Altcoin Market Could Spark Massive XRP Rally, But Will it Be Sustainable? - newsBTC - January 5th, 2020
- This Small-Cap Altcoin Is Quietly up Over 50% in the Last 2 Days - SludgeFeed - January 5th, 2020
- ElectraPay is Another Altcoin Payment Solution no one Really Needs - The Merkle Hash - January 5th, 2020
- Ethereum [ETH/USD] Technical Analysis: Price Remains Unmoved as Users clamor for Altcoin Revolution ... - TWJ Crypto - January 5th, 2020
- 2019: Alt-Season has comeand gone - Where is altcoin heading in 2020? - FXStreet - December 30th, 2019
- Ethereum, XRP, and BCH: Why Traders are Optimistic on Altcoin Market - newsBTC - December 30th, 2019
- Altcoin Apocalypse: Which Crypto Assets Will Survive Another Year - newsBTC - December 30th, 2019
- XRP, Bitcoin are the most bought coins on Coinbase - AMBCrypto - December 30th, 2019
- Heres Why XRP Price Could Soon Burst 60% Higher - Ethereum World News - December 30th, 2019
- 2019 in review: Which altcoins performed the best vs Bitcoin? - Coin Rivet - December 27th, 2019
- Privacy-Focused and Privacy Centric Blockchains - Altcoin Buzz - December 27th, 2019
- NULS Hacked. $480 Worth of NULS Token Stolen - Cryptocurrency Regulation - Altcoin Buzz - December 27th, 2019
- 2019 in review: Which altcoins performed the best vs Bitcoin? - Yahoo Finance - December 24th, 2019
- Altcoins bubble on the way, crypto market cap may reach $11 trillion by 2023 - FXStreet - December 24th, 2019
- Litecoin price prediction 2020: can it become the best-performing altcoin of the coming decade? - Capital.com - December 24th, 2019
- 2019: The Year in Altcoins, and the Year Ahead - Finance Magnates - December 24th, 2019
- XRP is Down 95% from Its 2018 Peak; Whats Next for the Embattled Crypto? - newsBTC - December 22nd, 2019
- BitGo Will Comply with FATF - Cryptocurrency Regulation - Altcoin Buzz - December 22nd, 2019
- Why Have Altcoins Slumped Back to Crypto Winter Levels? - newsBTC - December 21st, 2019
- Bitcoin Price Diary: Long BTC From $6.5K and Back in Altcoin Positions - Cointelegraph - December 21st, 2019
- LTC, XTZ, TRX, and XLM Crypto Price Prediction: Will Altcoins Test Key Resistance Levels? - U.Today - December 21st, 2019
- Can Ethereum (ETH) And Other Altcoins Still See A Rise In Dominance? - Crypto Daily - December 21st, 2019
- Orchid Launches on Coinbase and Sees 200%+ Gain - Altcoin Buzz - December 21st, 2019
- Ripple Raises $200M, Calls 2019 Its Strongest Year of Growth - Cointelegraph - December 21st, 2019
- Pionex and Dash are Now Partners - Business Partnerships - Altcoin Buzz - December 21st, 2019
- Ether Price Targets $160 as Altcoins Rally and BTC Trades Sideways - Cointelegraph - December 13th, 2019
- Ether Eyes $160 As BTC Oscillates And Altcoins Rally - - CryptoVibes - December 13th, 2019
- Whats the outlook for Litecoin in 2020? - Coin Rivet - December 13th, 2019
- Ethereum Classic is the Top Altcoin in Daily Active Addresses, Heres Why - Coingape - December 13th, 2019
- Nike Shoes and Ethereum? Why Not - Altcoin Buzz - December 13th, 2019
- Top 3 price prediction Bitcoin, Ethereum, Ripple: Altcoin auto-MATIC carnage - FXStreet - December 11th, 2019
- Altcoin Meltdown Intensifies as Tezos, Ravencoin, VeChain Take the Plunge - CCN.com - December 11th, 2019
- Altcoins: Could This Be the End of Tokens? - CoinCodex - December 11th, 2019
- Latest Litecoin price and analysis (LTC to USD) - Coin Rivet - December 11th, 2019
- Bitrefill and Bitfinex Are Now "Partners in Crime" - Business Partnerships - Altcoin Buzz - December 6th, 2019
- Altcoin apocalypse XRP, Bitcoin Cash and ZEC over 90% removed from ATH - Born2Invest - December 5th, 2019
- Which Major Altcoins Will Still Be Top Ranking Long Term? A Historical Review of the Altcoin Market's Past Perhaps Provides Clues Crypto.IQ | Bitcoin... - December 4th, 2019
- XRP Added to Japanese Altcoin Market by BitFlyer - The Coin Republic - December 4th, 2019
- The Worst Is Yet To Come For Altcoin Market Cap - newsBTC - December 2nd, 2019
- Altcoin Apocalypse: The Number of Dying Crypto Currencies Is Rising - newsBTC - December 2nd, 2019
- Altcoin Dominance Steadily Increases While Bitcoin Takes a Dive - BeInCrypto - December 2nd, 2019
- Learn The Basics of Masternode Investments: An Exclusive Interview with Iakov Trevor Levin of Midas - Coinfomania - December 2nd, 2019
- How to Beat Bitcoin With Altcoins (Using the BMJ Crypto Portfolio Optimization Tool) - Bitcoin Market Journal - December 2nd, 2019
- Massively Successful: That is What Electroneum Wants To Be - Spotlight - Altcoin Buzz - November 23rd, 2019
- Google a Threat to Bitcoin? Community Disagrees - Finance and Funding - Altcoin Buzz - November 23rd, 2019
- Heres How Much of Each Major Altcoin Is Owned by Whales - BeInCrypto - November 21st, 2019
- Altcoin Volatility Rising, But Alt Season Wont Arrive Until Bitcoin Volume Returns - newsBTC - November 21st, 2019
- What will it take for a Litecoin bull run in 2020? - Yahoo Finance - November 21st, 2019
- Crypto Analyst: Ethereum, XRP and Altcoins Poised for Major Rally As Bitcoin (BTC) Dominance Drops - The Daily Hodl - November 18th, 2019
- Bye-Bye Bitcoin? Why the Altcoin Bottom is In - newsBTC - November 18th, 2019
- Proof of Stake Creator: Bitcoin Unlikely to Dominate Altcoins in Long Run - Ethereum World News - November 18th, 2019
- Best Bitcoin/Altcoin Wallets For iPhone [2019 Edition] - October 1st, 2019
- Crypto Conundrum: Bullish Bitcoin Price Action Halts Altcoin ... - April 24th, 2019
- Altcoin Season 2019 Thrives: Everex (EVX) Leading Binance ... - April 21st, 2019
- What is an Altcoin? - CCN - February 9th, 2019
- Altcoin Trader South Africa - ice3x Altcoin Exchange ... - February 2nd, 2019
- Altcointrader.co.za Review - Altcoin Trader, Login ... - January 27th, 2019
- Bitcoin History Part 5: A Wild Altcoin Appears - Bitcoin News - January 9th, 2019
- Latest News on Altcoin | Altcoin Breaking News | DC Forecasts - January 9th, 2019
- Altcoin Daily Preview: Tron (TRX) Could Bounce back ... - January 9th, 2019
- Most promising Altcoins and ... - Captain Altcoin - January 8th, 2019
- Altcoin - Investopedia - December 12th, 2018