LayerTwoLabs co-founder and CEO Paul Sztorc believes the so called drivechains he is creating for the Bitcoin network will “make everyone in the world a Bitcoin user” in the long term and sees the crypto asset reaching the price of $20 million per coin.
“The lack of sidechains is the biggest problem [in the crypto industry],” Sztorc of LayerTwoLabs tells MetaNews, referring to the fact that a countless number of copies of Bitcoin have been promoted. Instead of working on expanding Bitcoin, newcomers want to issue their own coin, often lamenting “old” Bitcoin as out of touch.
“It destroys the truth and turns everyone into a propagandist for their coin. It ruins everything,” Sztorc, the author of two Bitcoin improvement proposals (BIPs), BIP 300 and BIP 301. Sidechains provide an avenue for a new type of “altcoin” – one that is connected directly to the Bitcoin network. He says drivechains have the potential to “revolutionize” the way Bitcoin is used by enabling “greater scalability, extensibility, privacy, and flexibility on the network.”
“We believe that drivechains have the potential to kill altcoins, increase Bitcoin adoption, and provide the catalyst for hyperbitcoinization,” his company announced this week.
Crypto markets in trouble
He alludes to the fact that the crypto markets are in trouble, but Sztorc believes this is a function of what he described as “naïve greed” on the part of industry players.
The problems the cryptocurrency industry face are a “combination of factors but one big one is that the culture of Bitcoin no longer emphasizes use, causing the soul of the project to decay into naive greed instead of creation,” he says.
Technically, drivechains spell out a specific way to create Bitcoin sidechains. Sidechains, on the other hand, are parallel blockchains to Bitcoin that enable BTC to “flow” between the two networks in a two-way peg.
And because Bitcoin can’t actually leave the Bitcoin network, sidechains accomplish this task by locking up BTC on the Bitcoin blockchain and representing them in different ways in the sidechain. The goal is that the representation of BTC in the sidechain maintains a 1:1 peg to the actual BTC locked on the Bitcoin network.
Drivechains are not entirely new
Sztorc’s plan is not an entirely new one. Liquid is the most popular sidechain in the Bitcoin ecosystem today, but it is not a genuine two-way peg.
Liquid’s model leverages a federation to handle the on-chain lock-up and withdrawals, as well as sidechain block creations. Drivechains attempt to shift from a federated model and favor something it considers more decentralized – Bitcoin’s own miners.
$3 million in fresh funding for drivechains to become a reality on top of #Bitcoin
— Will Foxley (@wsfoxley) December 20, 2022
Layer 2 Labs successfully closed a seed round recently and raised $3 million in funding.
Under its drivechain model, bitcoin miners also mine sidechain blocks, albeit blindly. This way, the miner doesn’t need to run software for that specific sidechain, while still accruing from the value being transacted on that parallel chain, most fees paid on the sidechain go to the bitcoin miners. Ultimately, this also contributes to greater fee revenue in Bitcoin.
Bullish on bitcoin
In the long term, Sztorc is bullish on Bitcoin and sees it reaching $20 million per coin. Yes, $20 million.
But he sees the extinction of the US dollar.
“In the long term Bitcoin is going to $20+ million per coin, though there will not be a USD at that time so the phrase will not be used. Short term who knows. Anything like Solana that gave its founders 20+% allocation, will pump for 0-18 months then die. It’s a certainty,” Sztorc says.
He says that although exchanges are “enormously profitable”, they are also vulnerable to enormous hacks and embezzlement. In the future, he hopes exchange failure will be come rare. “Exchange failure used to be the norm, but got rarer over time. Probably that will continue,” he said. “Have we seen the worst (for cryptocurrencies)? Probably not. Worst would be everything going to zero.”
He says his company has designs for several drivechains. “We have 6 sidechain-designs in development already, including two which are exact clones of Ethereum and zCash (but BTC-only),” he said.
“These allow for immediate global scale, impenetrable easy-to-use privacy, and complete freedom (for users and developers).”
Sztorc says he is also seeking to improve the user experience in Bitcoin with more focus around activities necessary for “self-sovereign” bitcoin ownership.
“We want REAL bitcoin users –– users who run nodes, and hold keys,” he added. “This requires a revolution in UX and education… which we aim to bring about. Nodes should be easy to run and do useful things that any layperson can understand and appreciate.”
Lastly, Sztorc says his firm will work on what he says are “high-risk, high-reward problems.”
These include prediction markets and a resurrected Namecoin, Sztorc revealed. “These services will revolutionize media and telecommunications, just as Bitcoin will revolutionize Banking.”
Drivechain allows for sidechains
Drivechain is a type of blockchain technology that allow for the creation of sidechains, which are separate blockchain networks that are connected to the main BTC blockchain (also known as the parent chain). Sidechains can be used to perform a variety of functions, such as testing new features or protocols, conducting transactions with different types of assets, or running smart contracts.
A functioning drivechain allows users to transfer assets between the main blockchain and sidechains in a secure and trustless manner. This is achieved through the use of special two-way peg systems, which allow users to lock up their assets on the main chain and then release them on the sidechain, or vice versa. Thanks to this, it’s possible to create “altcoins” that interact directly with the Bitcoin main chain. Bits of bitcoins “can become” altcoins. These versions of bitcoin can use different rules, like altcoins do. Still, miners need to agree.
Drivechains also have the potential to improve the scalability and efficiency of blockchain networks, as they can be used to offload certain types of transactions or processes from the main chain. This can help to reduce congestion on the main chain and improve its overall performance.