Bitcoin (BTC) can only exist on the Bitcoin blockchain, as decided on day one. While this is inherent to Bitcoin's nature, it also presents a challenge to its scalability.

The recently popular BRC-20 protocol has put unprecedented pressure on the Bitcoin network, on May 7th, it accounts for more than 65% of transaction volume on the blockchain.

To expand the reach of Bitcoin, various methods have been developed, such as cross-chain mapping. Wrapped Bitcoin (WBTC) on Ethereum, Wrapped Bitcoin (BTCB) on Binance Smart Chain, and Bitcoin Cash (BCH), a fork of Bitcoin, all enable Bitcoin to be mapped onto their own networks. Sidechains can also be used to transfer bitcoins, with additional functions and applications beyond.

One potential solution to promoting the circulation of Bitcoin and enhancing the value of the Bitcoin blockchain ecosystem is Drivechain. Drivechain is an upgraded version of sidechain technology, and Layer Two Labs is the development company behind it.

So what is a Drivechain?

Essentially, it is a technology based on sidechain, but with improvements.

To understand the concept of sidechains, it's important to know that the "side" refers to its relationship with the main chain (Parent Chain). The sidechain protocol enables BTC to move from the Bitcoin blockchain to other blockchains. Prior to the emergence of sidechains, the proliferation of alternative cryptocurrencies (altcoins) accelerated the fragmentation of the digital currency market. Additionally, with the introduction of other blockchain projects like Ethereum, Bitcoin developers sought to improve the scalability of Bitcoin via sidechains.

Sidechains can be independent blockchains with their own customised ledger, consensus mechanism, transaction type, script and contract support, and more. This allows for greater adaptability to different use cases. While data and value cannot be directly exchanged between different blockchains, sidechain technology enables different blockchains to be connected, facilitating cross-chain interaction and improving scalability. Sidechains can also improve privacy and compatibility, and enable more flexible smart contract functions. For instance, if you want to keep your transactions private, you can use a sidechain to transfer transaction information from the main chain to the sidechain, which can have custom visibility permissions for sensitive information.

Drivechain: An Upgrade Version of Sidechain

The concept of sidechains has been around for a while and it allows users to lock bitcoins on the Bitcoin blockchain and unlock other currencies representing these bitcoins on the sidechain. Although there is no actual transfer of bitcoins happening on the sidechain, it creates an illusion of transfer by allowing users to unlock other currencies. However, this transfer is based on the premise that the third party overseeing the locked bitcoins is honest and reliable. If a third party escapes or maliciously unlocks, it can lead to malicious double-spending.

To reduce this risk, Drivechain was created. The upgrade of Drivechain has added the participation of miners, making it possible for the circulation of Bitcoin to no longer require the supervision of third-party institutions. In 2017, Paul Sztorc, CEO and founder of LayerTwo Labs, proposed two Bitcoin Improvement Proposals: BIP 300 Hash Rate Escrows and BIP 301 Blind Merged Mining. These two BIPs are the core concepts behind Drivechain, and Paul Sztorc is also the inventor of the Drivechain concept.

BIP 300 allows miners to act as an amorphous group collectively hosting funds stored on all sidechains. It describes in detail how to create a new sidechain, the activation of a new sidechain, a set of withdrawal requests, as well as the verification logic of real withdrawal transactions and deposit transactions. BIP 301 allows Bitcoin miners to become sidechain block producers of the consensus layer without the need to verify the blocks of the sidechain. The combination of the two not only allows Bitcoin miners to participate in sidechain mining to obtain profits but also reduces the risk of decentralization caused by it.

However, Drivechain also has its own risks. The miners on the drive chain can collectively rob the sidechain fund. If a group of miners unite and hold the majority of computing power for more than six consecutive months, they can initiate a withdrawal transaction to launder all the money on the sidechain and transfer it to their own accounts. The cost is too high, including the loss of revenue caused by stopping blind merged mining, becoming a public enemy of the community, the loss of miners, and the price drop of Bitcoin.

Apart from enabling more secure Bitcoin transfers, Drivechain can also solve many problems, further catalyze the innovative application of the Bitcoin blockchain, and improve scalability. With the participation of miners, Drivechain has become a more reliable and decentralized solution for sidechain transactions.

LayerTwo Labs’ Bitcoin Hard Fork

Drivechain is the core of LayerTwo Labs' technology stack, invented by its founder Paul Sztorc and completed development in 2017. Here is a timeline: 

LayerTwo Labs raised $3 million in an angel funding round last December. Drivechain is LayerTwo Labs' soft fork of the blockchain main chain. In addition, the company will also carry out a hard fork of the blockchain in 2023. According to LayerTwo Labs, the company will create a brand new PoW blockchain - Mainchain.

Mainchain (MC) will come with all drive chain upgrades (BIP300 and BIP301) and will launch 7 sidechain dApps during the hard fork. In the vision of LayerTwo Labs, Mainchain will become BTC2.0 and become the only PoW chain that can support any concepts and ideas through sidechains.

It’s important to note that while Drivechain has been around for a while, it’s still not an official feature of the Bitcoin network, nor has it been officially adopted by the Bitcoin Core development team. While the technical implementation might not be complex, the success of Drivechain also depends on resolving game theory uncertainties and ensuring that the incentives of different actors align with the goals of the network. It will be interesting to follow whether it will eventually become a reality on Bitcoin.