In this episode of “The Van Wirdum Sjorsnado,” hosts Aaron van Wirdum and Sjors Provoost are once again joined by Ruben Somsen. The trio discussed Drivechain, a sidechain project spearheaded by Paul Sztorc.
Sidechains are alternative blockchains, on which coins are pegged to bitcoin. This should make the sidechain coins interchangeable with bitcoin and therefore carry an equal value. In a way, sidechains let users “move” bitcoin across blockchains, where they are subject to different protocol rules, allowing for greater transaction capacity, more privacy and other benefits.
Van Wirdum, Provoost and Somsen explained that Drivechain consists of two main innovations. The first is blind-merged mining, which lets bitcoin miners secure Drivechain with their existing hash power, but without necessarily needing to validate everything that happens on the sidechain. The second is hash rate escrows, which lets miners “move” coins from the Bitcoin blockchain to the sidechain and back.
The hosts also discussed some of the benefits as well as the complications with Drivechain, most notably the security implications of letting miners control the pegging-out process. They considered the arguments as to why this process is incentive compatible (in other words: secure) — or why it might not be.
Today, Blockstream has announced the addition of six members to Liquid, its federated Bitcoin sidechain. These members include Bitcoin wallet app Coinos, institutional digital asset custody provider Komainu, privacy infrastructure developer Nym Technologies, Liquid swap infrastructure provider SideSwap, Bitcoin-native financial services provider Vulpem Ventures and fintech-focused broker-dealer Watchdog Capital.
“With these new additions, there are now a total of 59 members in the Liquid Federation, including cryptocurrency exchanges, trading desks, infrastructure providers, gaming companies and digital securities services,” according to a press release shared with Bitcoin Magazine.
As a Bitcoin sidechain, Liquid provides a separate blockchain with tokens that are “pegged” to bitcoin — 1 L-BTC (as Liquid’s tokens are known) can be exchanged for 1 BTC. With different protocol rules, sidechains can offer more flexibility and scalability than Bitcoin’s blockchain can. Liquid operates under a “federated” model, with a federation of approved members overseeing the network.
According to the release, each of the new member projects will be providing or have already provided Liquid integrations that help users manage their assets:
“Coinos is a web wallet offering powerful interoperability across Bitcoin, the Lightning Network and the Liquid Network.”
“Komainu plans to offer custodial services to assets issued on the Liquid Network.”
“Nym mix node operators currently receive a confidential asset on Liquid, NYMPH, as the reputation score of their mix node. NYMPH is a valueless testnet token that keeps track of how long a node has been mixing traffic for testing purposes.”
“SideSwap is a tool that helps users perform Liquid peg-ins and peg-outs and atomically swap assets on the Liquid sidechain.”
“Vulpem is the developer of Marina, the world’s first wallet browser extension that enables a plug-and-play gateway into the Liquid Network, as well as the Liquid-based tools Liquid.Taxi and Liquid.Coach. Vulpem further maintains Go Elements and a trader-facing command-line interface for TDex, a non-custodial exchange for Liquid assets.”