The Complex Incentive Problems of Drivechains

Introduction

Drivechains have once again become a dominant topic of discussion within the cryptocurrency community. While proponents claim that the activation of drivechains introduces no new requirements or costs for miners, there are several issues regarding incentives that need to be addressed. In this article, we will focus on the problems surrounding the incentives for miners and how they may potentially affect the overall ecosystem.

Separation of Concerns: Mainchain Miners and Sidechain “Miners”

Drivechain proponents argue that the activation of drivechains does not impose any additional costs on miners. However, the design naturally incentivizes miners to take on full responsibility for operating and securing these sidechains themselves. While blind merge mining (BMM) allows users to bid for miners to select their sidechain block for confirmation, it fails to consider the capital requirements for becoming a sidechain miner. As the fee revenue generated by a sidechain grows, so does the capital required to become a sidechain miner. This could potentially lead to centralization as only miners with significant capital will be able to participate in constructing sidechain blocks.

Second Layer Fee Sniping

Another concern is the issue of fee sniping. As miners’ revenue increasingly relies on