Thoughts on Drivechain I: Miners can do things about which we will inevitably argue whether it is actually ‘stealing’ or not
There seems to be two main lines of criticism about drivechain, MEV and “miners can steal. ” I’m working on the MEV (still thinking through it) but here I’ll discuss the latter concern, which I think isn’t given the nuance it deserves. It’s not a dichotomy that can be determined by an experiment determining if miners will steal or not, it’s a question of how power can be abused.
In summary, the idea of hashrate escrow gives miners a type of explicit governance over a potentially significant part of the ecosystem. If drivechains are successful, there are many paths leading directly to traditional power brokering that most Bitcoiners are trying to steer clear of. Drivechain could provide new stepping stones toward miner collusion or enmeshment with the traditional financial system.
There are two parts to this:
1 Miners are gatekeepers of the sidechain ecosystem.
2. Miners can do things that might be stealing, depending on your viewpoint on a variety of things.
Here’s my quick outline of BIP300 for those who are uninitiated, and also to make it clear how I’m viewing it. BIP300 is a way to peg in and peg out Bitcoin to and from a sidechain. A sidechain is proposed, and then if 90% of miners over the next two weeks approve, funds for the sidechain are placed in a UTXO “lockbox.” The sidechain does whatever it wants, and then someone wants to cash out to actual Bitcoin, they propose a transaction releasing funds from the lockbox back to specified Bitcoin addresses. The miners then vote on these transactions over the next 3–6 months, releasing funds back if it seems like the transactions are legit, and rejecting if they seem fraudulent.
I’m deliberately not going describe the intentions of the protocol. Describing how the protocol is supposed to be used biases the discussion. We should be really asking “how could this be used by future Bitcoin users?” (who may or may not be alive yet, in particular might not be developers motivated by blocksize war era problems) and not “would miners dare steal Zcash bitcoins?” or “does this give large blockers a satisfying option?”
Miners are gatekeepers
Satoshi once said “I’m sure that in 20 years there will either be very large transaction volume or no volume.” I think the same applies to Drivechain. Twenty years after it is implemented there will probably be many active drivechains or it will be dead. If one drivechain is wildly successful, others will be proposed with different features.
Let’s follow this thread. Suppose drivechains are successful. Many different flavors of privacy coins have joined the ecosystem, many smart contract platforms now bridge to Bitcoin and deal in Bitcoin. It would follow that there would be quite a wide range of brilliant people with all sorts of great ideas who all want to see their side chain approved. One of the mantras of the drivechains is optionality, “if you don’t like sidechain X, don’t put your coins on sidechain X.”
Just to give some examples:
- PoS (Greenpeace version) Bitcoin.
- Avalanche, Solana, Ouroboros, Casper, Ripple, Chia, pick your favorite alt or consensus mechanism and bridge Bitcoin over there.
- Monera, Zcash, pick your favorite privacy coin or make up a fancier one.
- EU (or pick your favorite jurisdiction) 100%-KYC-only Bitcoin. Walled garden where only KYC Bitcoin lives.
- Amazon (or pick your favorite online retailer) lockbox. Instead of constantly consolidating UTXOs, customers pay to the lockbox to get credit and then Amazon withdraws once every 6 months.
- ice cream so good so good chain. Allows those with L1 Bitcoin a direct way to purchase cowboy hats to send to pinkydoll without going through fiat channels. (You may argue there will be better ways to do this, but the same is generally true of almost any altcoin, it won’t stop someone from thinking drivechains are awesome and proposing it. )
- Twitter (or pick your favorite social media) bridge. Verified users can pay in and then send each other instant payments.
- New feature sandbox land. Let’s just go ahead and try CTV and see what happens!
- Argentinian Chivo Chain. Inspired by El Salvador, the Argentinian government decided they want to go on a Bitcoin standard, but it’s run by a private corporation.
- Canadian Trucker coin. Details yet to come, but the developers assure you it was definitely inspired by the Canadian Truckers.
- Assassination Market chain. This is a futures market protocol with super duper privacy assurances
- P = NP lockbox. Donate to this lockbox, and miners will release funds to whomever proves the conjecture.
- Bitcoin core developer treasury lockbox. Donate, and developers are paid salary from the lockbox.
- Open source bug bounty lockbox. Someone creates a bug bounty by dropping it in a lockbox, and then miners release coins when the miners determine bugs satisfying the criteria have been found.
- Kanye West (or Luke Dashjr) personal lockbox. Kanye doesn’t want to have to remember a 12 word password, and doesn’t trust anybody to handle his keys, so he tells miners to keep his funds in the lockbox and release when he says so, or according to his will if he is deceased.
- Dan Held cryogenic lockbox. Before death, Dan Held deposits his bitcoin in a lockbox, with the instruction. When Dan Held is unfrozen and returns to life sometime in the coming centuries, miners are to release the lockbox coins, half to Dan, half to whatever corporation restores him to life. Dan is concerned that he might forget his 12 word key after being unfrozen.
In short, just like there’s 24,483 altcoins at the moment, there would be 24,483 ideas for sidechains. You have to imagine VCs get bored with AI and discover drivechain as “Blockchain AND Bitcoin. OMG.” Some of these ideas are just dumb, some might be interesting, worth a try, some might bring more awareness and demand to Bitcoin, some might degrade Bitcoin, some might allow for Bitcoin to be embraced more fully by the mainstream financial system.
Now, some people say, “the point of shitcoins is entirely to shitcoin”, and these people may be largely correct. But even if 1% of the altcoins have legitimate use cases outside of creating a token pump, there’s still going to be lots of legitimate reasons for creating a sidechain.
Now, it’s important to note there’s only 256 slots for sidechains, so at any time there can be only 256 sidechains.
Clearly then, norms will develop and patterns of communication will develop. Anyone who wants a sidechain project must go through whatever channels (probably similar to someone trying to propose softfork BIP right now) and convince 90% of miners to signal for their sidechain project. Probably many of these proposals won’t make it far because many will be prima facie bad. But the “conservative” default option will have shifted a little bit to the center: The philosophy is that we have these sidechains designed to let people try out whatever consensus or privacy option, and so why not let them try it out? Exactly how judicious should be miners in approving a sidechain?
Now as a miner, you have to take a position on everything.
Now this where politics and infighting immediately comes roaring back . Someone will propose a sidechain, and maybe 20% of the miners don’t vote for it over the next two weeks. This could be extremely frustrating, developers, miners and community who have supported this will want to know exactly what is wrong in the head with the miners or mining pools who voted against. Some people might leave their pools. Maybe some miners have legitimate objections. Maybe some listened to FUD. Maybe some are just lazy and don’t feel like doing any due diligence in acking it.
Now this is all inherently difficult and political. Certainly any of the above coins could be bad for Bitcoin, or could be good for Bitcoin in the long run. Ice cream so good so good could be the product that sparks the next wave of adoption. People will have different takes on the individual chains. People will have different takes on the principle of optionality, they might think a chain is dumb, but we should try it out of principle. Some may think that privacy coins intended for darkweb uses are antagonistic to future adoption, while others might think such coins are true to the spirit of bitcoin. Some miners will see votes as expressions of principle, other of practicality. Some believe principle is the only approach to practicality. Some will be cautious, some will be aggressive.
Now some may have undisclosed interests, if they are partnering with a business that may benefit or be harmed by the approval of a coin. If a for-profit corporation is trying to corner the market for a certain type of Bitcoin activity, they may lobby miners to approve their chain, and then lobby hard (perhaps even bribe) enough miners so that 10% disapprove of a competing project.
Remember, the idea here is that real money is going to be on the line, and the real money doesn’t come from nowhere. If real fees are going to be generated on a regular basis, it comes from actual economic activity. Buying and hodling doesn’t do it, so Bitcoin needs corporations with revenue streams. This means competition, and as Peter Thiel has elegantly argued (see “competition is for losers”) businesses should do everything in their power to destroy their competition, either by bribing or forming cartels.
This brings me to my first point — miners are going to be caught in a game in which winners and losers (or to be fair, the the players themselves) are chosen via a direct vote. It’s facile question-begging to just argue that “they will make the rational decision and do what’s best for Bitcoin” because this question is always deeply divisive and fraught. Miners, instead of focusing on efficiently producing hashes, need to be involved in these discussions.
Now here’s where it gets dangerous — these other players who want their own sidechains, they could be players with a much larger scale than any Bitcoin miners. Any future FAANG type corporation or bank is going to be making orders of magnitude more revenue than all Bitcoin miners who are working on tiny margins. So if Mark Zuckerberg get his sidechain and then wants to make sure that Elon never gets a sidechain, all he has to do is take a fraction of his budget and go buy out a small mining company, enough to get a 10–12% veto share. Now anybody who wants a sidechain has to make their case that the sidechain is going to be beneficial to Mark Zuckerberg, who can reject it at will, or demand concessions.
Miners have never had this sort of voting power before, but Drivechain will give them explicit power as gatekeepers.
The optimistic view is that drivechains are supposed to be very successful in bringing tens of billions of dollars in fees, which means probably trillions of dollars of commerce, and now miners are the gatekeepers of this ecosystem, via an explicit voting process. Miners are fighting over very tight margins that will be orders of magnitude less than the commerce they are supporting, so it’s hard to imagine they will not be vulnerable to influence.
Arguments that miners will make the rational decision to never do anything untoward is textbook question-begging.
Another argument is “who cares, this only gives them this power over the sidechain” is missing the point. The fact that this power is valuable may disrupt the balance of incentives to mine: Because miners have low profit margins, miners with incentives outside the traditional ones can easily push out the traditional miners.
Miners can do civil asset forfeiture.
It’s good design with drivechain to require a much higher threshold (90%) for approval as opposed to withdrawal (50%). If questionable projects get approved and funds get locked up, things can get really thorny and extremely political.
- After PoS Bitcoin is launched, someone does a long range grinding attack, and now wants to claim their PoS Bitcoin back on mainchain. They present their non-canonical but nonetheless “valid” chain as evidence, meanwhile the users who have been using the PoS Bitcoin every day rightly claim that “nobody uses that chain.” Maybe some Bitcoin miners are not sympathetic “we’ve been warning you about grinding attacks for decades, why didn’t you listen!!” This could immediately break down into a political discussion. Should the grinding attack coins be allowed back on the mainchain?
- Somebody goes ahead and wins an assassination market on a privacy coin, and now they want to cash out to the main chain. Miners can leave it frozen, miners can approve it, miners can create their own transaction and steal it and give it to charity. Obviously, this requires a somewhat intense political discussion. Miners who vote “yes” to a withdrawal are signaling approval for assassination markets, miners who vote “no” are signaling willingness to censor activities that are sufficiently bad.
- Maybe nobody has been assassinated, but it turns out that users of sidechain #120 are all literal Nazis and pay each other for stochastic violence. Now some Nazis are trying to withdraw. The publicly traded mining corporations now have to approve or disapprove, fully aware of public opinion and information that says these are literal Nazis.
- Russia invades Poland, and the nice knowledgeable OFAC people assure us that certain Russian oligarchs have Bitcoin tied up in sidechain #143 and we should go ahead and start the process of stealing that right now, to maybe nudge Russia towards getting their act together.
- Somebody sues so-and-so, and the court issues an order directing miners to not approve of so-and-so’s sidechain withdrawal. Miners can go against the order based on principle, or can go along with it because they agree with the plaintiff. Many conversations to be had.
All of the above consideration are valid only if miners are stealing from good sidechains. If there is a sidechain that is doing things wrong, scamming people, not being used at all, or is full of bugs, for example, that will be perceived as a bad sidechain, and then miners can and will safely steal from it and kill it, which will be perceived as a good thing by everybody.”
What attracted a lot of people to Bitcoin is that Nakamoto Consensus doesn’t rely on value judgments of who are the good players and who are the misbehaving bad actors. That’s a very transparent design choice. We know from centuries of human history that the lack of universal clarity of in these regards will be exploited.
It should be obvious how authorizing miners to go steal from the bad projects, because obviously this is “perceived as a good thing by everybody” could lead to bad outcomes. This reminds me of civil forfeiture, which is wildly abused.
I don’t believe that threat of UASF keeps them in line, anymore than the argument that a government who prints too much money will lose legitimacy. Or that lawmakers who approve of, say gerrymandering, have to fear being voted out of office for sins against democracy. There’s not going to be a global contentious and very disruptive UASF because miners have overstepped and confiscated some (alleged, but probable) literal Nazi’s coins, especially if major corporations need to make sure the blockchain is functioning 24/7.
In summary, the privileged position of judge, jury and executioner puts the miners in a potentially coveted position, and this position has motivations and incentives that will be stronger than old-fashioned mining. This could, in turn, change the composition and distribution of miners.