jakedasnake123 on Nostr: Below is an evaluation of why Drivechain (BIP 300/301) might, in theory, bring more ...
Below is an evaluation of why Drivechain (BIP 300/301) might, in theory, bring more overall fee revenue (and thus higher security) to the Bitcoin network than the Lightning Network (LN)—despite both being dependent on (1) the Bitcoin price and (2) user-paid fees once the block subsidy reaches near zero.
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1. Context: Fee Revenue After the Subsidy Declines
1. Shared Dependencies
Both Lightning and Drivechain ultimately rely on the same two pillars for miners’ post-subsidy income:
1. BTC’s Price Appreciation (makes even modest block subsidies or fees more valuable in fiat terms).
2. Transaction Fee Payments (by users or L2 protocols ultimately settling on the main chain).
2. The Core Question
Why might Drivechain specifically yield greater fee revenue to miners—or improve overall security—relative to LN, given that both aim to scale Bitcoin?
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2. Distinct Economic Models: Drivechain vs. Lightning
2.1 Lightning Network: Sparse On-Chain Interactions
Off-Chain Transactions: LN processes the vast majority of payments off-chain, with no direct fee per transaction flowing to miners.
Channel Opens/Closes: Miners receive fees only when a channel is opened, closed, or force-closed (and possibly for other rebalancing actions on-chain). By design, LN tries to minimize these on-chain interactions.
Net Effect: If LN becomes extremely successful, day-to-day transactions no longer touch the base chain. Users might open channels infrequently. So total fees going to miners could end up relatively low, unless block space becomes so scarce that each channel-related on-chain transaction costs a very high fee.
2.2 Drivechain: Per-Transaction Fees via Merged Mining
Merged Mining: Drivechain sidechains share Bitcoin’s SHA-256 hashpower; miners include sidechain “block headers” in their main Bitcoin blocks.
Direct Fee Flow: Each transaction on a Drivechain sidechain pays a fee to Bitcoin miners (via the merged-mining process).
High Usage = High Miner Revenue: If a sidechain processes large volumes of transactions—potentially billions or trillions yearly—miners can collect per-transaction fees, not just sporadic channel opens/closes.
Net Effect: Widespread usage on multiple Drivechains could funnel constant fee revenue to miners, even if base-layer (L1) block space remains small and uncongested.
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3. Mechanisms by Which Drivechain Could Increase Network Security
1. Capturing Users Who Would Otherwise Go Elsewhere
Innovation / Smart Contracts: Today, developers or users seeking advanced features often turn to alt-chains (e.g., Ethereum, Solana) rather than LN or Bitcoin L1.
Drivechain can host new ideas (larger blocks, different scripting languages, privacy features, etc.) while still paying BTC miners.
This means Bitcoin retains more transaction volume (which otherwise might “fragment” onto competitor blockchains), increasing total fees for miners.
2. Per-Transaction Fees on Sidechains
LN: Offloads most transactions to a purely off-chain channel model. Miner fees only occur at settlement points (opens/closes).
Drivechain: Every single transaction on the sidechain includes a fee to miners.
Long-Term Security: A high velocity of sidechain transactions translates directly to high fee income, fueling hashpower and elevating the cost of a 51%-attack on the base chain.
3. Optional Use, Retaining L1 Decentralization
Drivechain does not necessitate big L1 blocks or a mandatory on-chain throughput increase. It remains optional; users can ignore it if they do not need it.
Meanwhile, those wanting higher throughput or specialized features can use the sidechain, paying fees that still enrich miners.
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4. Potential Counterpoints and Limitations
1. Lightning Could Still Generate Substantial Fees
In a high-demand environment with small L1 blocks, LN channel opens/closes might become very expensive, generating significant fees for miners.
LN fees might scale up if on-chain space is scarce (e.g., if channel openings cost tens or hundreds of dollars, total miner revenue could be meaningful—although this might be less user-friendly).
2. Drivechain Adoption Not Guaranteed
To realize large fee flows, Drivechains must become widely adopted and host genuine economic activity. If sidechains fail to attract real usage, the potential benefits remain unrealized.
Technical or political disagreements might hinder Drivechain activation in Bitcoin.
3. Custodial Solutions
Many users might prefer custodial wallets or exchange-based “layer 2,” paying negligible on-chain fees. This is a universal risk for all L2s: if custodians batch transactions heavily, direct fees to miners can still be limited.
4. Miner Collusion / Governance
Drivechain requires miners to confirm sidechain withdrawals. Critics worry that a majority of miners could collude to censor or freeze sidechain funds (though there are proposed cryptoeconomic disincentives for doing so).
LN does not rely on miner voting for channel closes—only on standard Bitcoin consensus rules.
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5. Academic Assessment: Does Drivechain Advantage Matter?
1. Direct, Continuous Fee Income Model
Advantage: Drivechain’s biggest value proposition is that every transaction on the sidechain can feed miners—unlike LN, which tries to minimize on-chain fees by design.
Reason: In LN, the chain sees few settlement transactions by intention, so LN’s success can ironically reduce overall base-layer fees. By contrast, if a Drivechain is successful, its usage increases miner fees in direct proportion.
2. Preventing Fragmentation to Other Blockchains
Advantage: A robust sidechain ecosystem (hosting dApps, new token types, or advanced smart contracts) could keep usage within Bitcoin. Users are less tempted to migrate to alt-L1s, thus preserving the economic mass (fees, liquidity) under the Bitcoin miner umbrella.
LN alone does not accommodate complex dApps or large-block throughput. Users wanting those features typically leave Bitcoin’s ecosystem, meaning miners do not earn from that activity.
3. Higher Long-Term Security Budget
Advantage: More transactions paying fees to BTC miners should raise the cost of a 51%-attack.
LN, in principle, could produce high fees only if channel opens/closes become extremely expensive (or extremely frequent). That scenario might be less stable or user-friendly compared to a continuous fee model.
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6. Conclusion
From an academic perspective:
Yes, both Lightning and Drivechain rely on the same ultimate prerequisites: (a) a robust BTC price, and (b) user demand for Bitcoin-based transactions.
However, Drivechain can, in theory, bring more total fee revenue into Bitcoin if it successfully hosts new functionality and transaction volume that would otherwise leave the Bitcoin ecosystem (to altcoins, specialized blockchains, or completely different networks).
Lightning is optimized to reduce on-chain fees (by batching many payments into channels) and does not provide a direct, per-transaction revenue stream for miners. If LN truly takes over most global payments, it might ironically limit the base-layer fee economy.
Therefore, the advantage of introducing Drivechain is the possibility of a stronger, more direct “fee funnel” for miners—driven by sidechains that remain under Bitcoin’s security umbrella. This could, in the long run, bolster network security more reliably than LN’s relatively sparse settlement model.
The key caveat is that this advantage materializes only if:
1. Drivechain is activated and widely accepted; and
2. Sidechains become popular enough to generate substantial transaction volume.
Otherwise, the theoretical gains remain unrealized.
---
1. Context: Fee Revenue After the Subsidy Declines
1. Shared Dependencies
Both Lightning and Drivechain ultimately rely on the same two pillars for miners’ post-subsidy income:
1. BTC’s Price Appreciation (makes even modest block subsidies or fees more valuable in fiat terms).
2. Transaction Fee Payments (by users or L2 protocols ultimately settling on the main chain).
2. The Core Question
Why might Drivechain specifically yield greater fee revenue to miners—or improve overall security—relative to LN, given that both aim to scale Bitcoin?
---
2. Distinct Economic Models: Drivechain vs. Lightning
2.1 Lightning Network: Sparse On-Chain Interactions
Off-Chain Transactions: LN processes the vast majority of payments off-chain, with no direct fee per transaction flowing to miners.
Channel Opens/Closes: Miners receive fees only when a channel is opened, closed, or force-closed (and possibly for other rebalancing actions on-chain). By design, LN tries to minimize these on-chain interactions.
Net Effect: If LN becomes extremely successful, day-to-day transactions no longer touch the base chain. Users might open channels infrequently. So total fees going to miners could end up relatively low, unless block space becomes so scarce that each channel-related on-chain transaction costs a very high fee.
2.2 Drivechain: Per-Transaction Fees via Merged Mining
Merged Mining: Drivechain sidechains share Bitcoin’s SHA-256 hashpower; miners include sidechain “block headers” in their main Bitcoin blocks.
Direct Fee Flow: Each transaction on a Drivechain sidechain pays a fee to Bitcoin miners (via the merged-mining process).
High Usage = High Miner Revenue: If a sidechain processes large volumes of transactions—potentially billions or trillions yearly—miners can collect per-transaction fees, not just sporadic channel opens/closes.
Net Effect: Widespread usage on multiple Drivechains could funnel constant fee revenue to miners, even if base-layer (L1) block space remains small and uncongested.
---
3. Mechanisms by Which Drivechain Could Increase Network Security
1. Capturing Users Who Would Otherwise Go Elsewhere
Innovation / Smart Contracts: Today, developers or users seeking advanced features often turn to alt-chains (e.g., Ethereum, Solana) rather than LN or Bitcoin L1.
Drivechain can host new ideas (larger blocks, different scripting languages, privacy features, etc.) while still paying BTC miners.
This means Bitcoin retains more transaction volume (which otherwise might “fragment” onto competitor blockchains), increasing total fees for miners.
2. Per-Transaction Fees on Sidechains
LN: Offloads most transactions to a purely off-chain channel model. Miner fees only occur at settlement points (opens/closes).
Drivechain: Every single transaction on the sidechain includes a fee to miners.
Long-Term Security: A high velocity of sidechain transactions translates directly to high fee income, fueling hashpower and elevating the cost of a 51%-attack on the base chain.
3. Optional Use, Retaining L1 Decentralization
Drivechain does not necessitate big L1 blocks or a mandatory on-chain throughput increase. It remains optional; users can ignore it if they do not need it.
Meanwhile, those wanting higher throughput or specialized features can use the sidechain, paying fees that still enrich miners.
---
4. Potential Counterpoints and Limitations
1. Lightning Could Still Generate Substantial Fees
In a high-demand environment with small L1 blocks, LN channel opens/closes might become very expensive, generating significant fees for miners.
LN fees might scale up if on-chain space is scarce (e.g., if channel openings cost tens or hundreds of dollars, total miner revenue could be meaningful—although this might be less user-friendly).
2. Drivechain Adoption Not Guaranteed
To realize large fee flows, Drivechains must become widely adopted and host genuine economic activity. If sidechains fail to attract real usage, the potential benefits remain unrealized.
Technical or political disagreements might hinder Drivechain activation in Bitcoin.
3. Custodial Solutions
Many users might prefer custodial wallets or exchange-based “layer 2,” paying negligible on-chain fees. This is a universal risk for all L2s: if custodians batch transactions heavily, direct fees to miners can still be limited.
4. Miner Collusion / Governance
Drivechain requires miners to confirm sidechain withdrawals. Critics worry that a majority of miners could collude to censor or freeze sidechain funds (though there are proposed cryptoeconomic disincentives for doing so).
LN does not rely on miner voting for channel closes—only on standard Bitcoin consensus rules.
---
5. Academic Assessment: Does Drivechain Advantage Matter?
1. Direct, Continuous Fee Income Model
Advantage: Drivechain’s biggest value proposition is that every transaction on the sidechain can feed miners—unlike LN, which tries to minimize on-chain fees by design.
Reason: In LN, the chain sees few settlement transactions by intention, so LN’s success can ironically reduce overall base-layer fees. By contrast, if a Drivechain is successful, its usage increases miner fees in direct proportion.
2. Preventing Fragmentation to Other Blockchains
Advantage: A robust sidechain ecosystem (hosting dApps, new token types, or advanced smart contracts) could keep usage within Bitcoin. Users are less tempted to migrate to alt-L1s, thus preserving the economic mass (fees, liquidity) under the Bitcoin miner umbrella.
LN alone does not accommodate complex dApps or large-block throughput. Users wanting those features typically leave Bitcoin’s ecosystem, meaning miners do not earn from that activity.
3. Higher Long-Term Security Budget
Advantage: More transactions paying fees to BTC miners should raise the cost of a 51%-attack.
LN, in principle, could produce high fees only if channel opens/closes become extremely expensive (or extremely frequent). That scenario might be less stable or user-friendly compared to a continuous fee model.
---
6. Conclusion
From an academic perspective:
Yes, both Lightning and Drivechain rely on the same ultimate prerequisites: (a) a robust BTC price, and (b) user demand for Bitcoin-based transactions.
However, Drivechain can, in theory, bring more total fee revenue into Bitcoin if it successfully hosts new functionality and transaction volume that would otherwise leave the Bitcoin ecosystem (to altcoins, specialized blockchains, or completely different networks).
Lightning is optimized to reduce on-chain fees (by batching many payments into channels) and does not provide a direct, per-transaction revenue stream for miners. If LN truly takes over most global payments, it might ironically limit the base-layer fee economy.
Therefore, the advantage of introducing Drivechain is the possibility of a stronger, more direct “fee funnel” for miners—driven by sidechains that remain under Bitcoin’s security umbrella. This could, in the long run, bolster network security more reliably than LN’s relatively sparse settlement model.
The key caveat is that this advantage materializes only if:
1. Drivechain is activated and widely accepted; and
2. Sidechains become popular enough to generate substantial transaction volume.
Otherwise, the theoretical gains remain unrealized.