184 sats \ 1 reply \ @lightcoin_ 14 Aug 2023 \ on: Drivechains Won't Eradicate Altcoins bitcoin
Overall I agree with the main thesis, that drivechains alone won't eradicate altcoins. I've said as much before, in less certain terms then but it's probably safe to say that altcoins will always exist at least on the fringes. I do think that drivechains weaken the altcoin narrative "our coin has value because bitcoin can't do [insert unique altcoin feature]", which won't stop the most degenerate gambling on alts but would probably make the smarter investors think twice before buying another coin whose "unique feature" could be quickly copied onto a drivechain.
Balance is appropriate. Bitcoin's economics -- PoW, monetary policy, block size limits -- are pretty solid. It took the community almost 10 years and a civil war to get here, but we now have strong consensus on these things. Thinking about how we can make BTC as a monetary asset more useful by evolving its capabilities (without harming that solid economic foundation) is a natural next step. This is where proposals such as drivechains, covenants, L2 rollups, Simplicity, and APO come in. I wouldn't say these discussions "overemphasize technical aspects" I think it's just that improving the technology (rather than the economics) is the main thing we have left to do.
This is true for some people but not others. I've used altcoins for their features, I know other people who have and still do as well. It is probably impossible to say what the ratio of holding-to-speculate vs holding-for-utility is; any measurement is further complicated because the lines between speculation and utility can be blurred (as they are with bitcoin e.g. "holding is using"). But the number certainly isn't zero.
There probably are many altcoin chains that Liquid and Rootstock are more popular than, if you look at metrics like TVL and daily active users. I don't know offhand where those sidechains rank but if I had to guess, somewhere in the 100 or 200 on those metrics. Out of thousands of altcoins.
As to why Liquid and Rootstock aren't even further up the rankings on those metrics, like in the top 10 or 20, as someone who has spent time professionally as a builder in both sidechain ecosystems and altcoin ecosystems, based on my conversations with users and devs/entrepreneurs there are several factors:
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Bitcoin sidechains rely on federated bridges. Based on feedback I've heard from users and builders, this is actually one of the bigger things holding sidechains back, and based on feedback I've heard drivechains are seen as a meaningful improvement. The need for centralized or federated bridges to use a sidechain today is unattractive for users and devs/entrepreneurs building on these chains. It's also daunting as the builder of a new sidechain, because creating and securing a bridge is no small task (compared to simply plugging into a consensus-layer bridge like drivechain's hashrate escrow). Trusted sidechain bridges are widely considered to be less secure than holding/using the native asset of any given chain. The 10s of thousands of BTC worth of value lost in bridge hacks over the past couple of years reinforces this view. That said, the Liquid and Rootstock bridges have a pretty good track record and are probably the most secure bridges on the market... but they are still riskier than using native assets. So then the tradeoff for users here is: use a native coin that might lose value against USD or BTC (whatever your benchmark is) OR use Rootstock or Liquid and possibly lose everything if the bridge gets hacked. We can simply look at the market to see what users and devs/entrepreneurs have ended up choosing to do.
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Quite a few altcoin chains have much larger app ecosystems and much more liquidity, developer tooling, exchange integrations, grants funding, investors, etc etc, which overall makes them comparatively more attractive to use and build on. Rootstock and Liquid are very small and immature ecosystems by comparison, requiring a big up front investment in effort and resources to build products with good UX. And for end users, the main reason to use Liquid or Rootstock instead of some alt is most likely ideology, not utility (since you can probably find the same app with more liquidity/better network effects on an altcoin chain). Again, we can look at the market and see what users and devs/entrepreneurs have decided to do when faced with the available options.
If bitcoin had drivechains I think more people would be willing to try using bitcoin sidechains, more developers would try building sidechains, and we would see a more vibrant sidechain ecosystem. Entrepreneurs might experiment with new incentive models to attract developers and liquidity to their chains and compete with altcoins for users (not the coin speculators/gamblers but the users who are there for utility). BTC the asset has the biggest network effects and brand recognition, so with the right incentives and interoperability protocols I could see drivechains becoming competitive with the most popular altcoin chains relatively quickly compared to the federated sidechains we have today.
When I look at the big picture, the most important thing for me is that Bitcoin is immutable, and that it is the most secure store-of-value in the world, because there is nothing quite like it in that respect. I am willing to sacrifice things like scalability towards micro payments, because the one feature of Bitcoin is so heavily weighted in my mind. It's basically a billion-to-one ratio in terms of importance. Which means, yeah, Bitcoin's feature set may evolve extremely slowly in consideration to these other advances, but it's completely worth moving slow.
If there is a test network out there running an alternative version of Bitcoin that is experimenting with sidechains or drivechains and they show significant promise and adoption in terms of usability, with long-term proven security, I see no reason why we can't then start to discuss how those features can be merged into Bitcoin. Sometimes a fork comes up with a great idea, and there's no reason to block it once it's proven to be effective, safe, powerful, etc.
But until that's been demonstrated, I really am not a fan of changing anything other than bugs. It is a very personal take, and might push people to prefer to play in the grounds of altcoins, but my goal isn't Bitcoin being worth billions, the most popular, or Bitcoin being the best for daily transactions. My goal is Bitcoin being the ultimate store-of-value for the trillions upon trillions of fiat currency in existence. That alone will change the world in far more dramatic ways than people being able to buy coffee without a credit card.