Drivechains Won't Eradicate Altcoins \ stacker news ~bitcoin

2781 sats \ 17 comments \ @jimmysong 12 Aug 2023 bitcoin

There's a prevailing belief among advocates that drivechains will spell the end for altcoins. The logic is simple: if drivechains exist, they can replicate any function of an altcoin on Bitcoin itself, eliminating the need for the altcoin. For example, if an altcoin boasts privacy features, those could be integrated into Bitcoin using drivechains, making the altcoin redundant.

Technically, this perspective has merit. Many altcoin innovations can indeed be integrated into Bitcoin via sidechains. For example RSK is a Bitcoin sidechain that uses Ethereum's scripting language to copy its "features."

However, this viewpoint misses a fundamental point. Altcoins don't thrive purely due to their technical features. In fact, their primary purpose isn't technical at all. Altcoins mainly serve to profit their founders and early investors.

Take ZCash and ZClassic as examples. They are technically identical and the only difference is political. ZCash had a premine and a dev tax, ZClassic did not. They are completely redundant, yet, their coexistence remains undisturbed.

At its core, the altcoin world revolves around profit and politics, not technical features. Most of these "features" are not just dubious but actively harmful, as can be seen in the many different exploits of their bad designs. Technical features are significant only if they attract new investors. In essence, they serve more as promotional tools than as core functionalities.

Many mistakenly see Bitcoin's value solely in its technical attributes. While these are crucial, Bitcoin's real strength lies in its monetary nature and the decentralized scarcity it creates. Overemphasizing its technical aspects risks overlooking this foundational economic characteristic.

Drivechains are an intriguing technological development, but they're not going to suddenly stop new altcoins from launching or even succeeding in getting new people to buy in. People don't buy altcoins because of features, they buy altcoins because they want to gamble.

Besides, if it was just technical features, wouldn't other sidechains like Liquid and RSK be more popular than the thousands of altcoins out there? The past seven years suggest that drivechains won't change this.

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917 sats \ 0 replies \ @eggos 13 Aug 2023

There will always be shitcoins—they are a necessary evil.

Shitcoins and fiat currency are a corollary of the existence of the state, and the state is not going away anytime soon

Get used to it buddy boy

184 sats \ 1 reply \ @lightcoin_ 14 Aug 2023

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.

Bitcoin's real strength lies in its monetary nature and the decentralized scarcity it creates. Overemphasizing its technical aspects risks overlooking this foundational economic characteristic.

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.

People don't buy altcoins because of features, they buy altcoins because they want to gamble.

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.

if it was just technical features, wouldn't other sidechains like Liquid and RSK be more popular than the thousands of altcoins out there? The past seven years suggest that drivechains won't change this.

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:

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.
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.

0 sats \ 0 replies \ @0207a984de 21 Aug 2023 freebie

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.

42 sats \ 0 replies \ @TheBTCManual 12 Aug 2023

I agree, altcoins killer app is profit from seigniorage, the tech doesn't matter, Its just a fun story to tell people when you sell them something you created for nothing, you could make shitcoins on liquid today, RGB or Taproot assets but you'll be using tech thats user base sees through that nonsense, so its best to stick to the crypto space where you can hide within its massive misinformation complex they have going

Drivechains are a cool technology and I would like to see how people use it and experiment with it, create new business models, but this whole alts will be built on drivechains would require VCs to give up on all the things they built and opt for DCs and I don't see tha happening

20 sats \ 1 reply \ @birdeye21 12 Aug 2023

I don’t think anything necessarily will “kill” altcoins.

They’ll simply fade into irrelevance over time as their failure to keep up with BTC will become too costly for bagholders to stomach

140 sats \ 0 replies \ @kepford 12 Aug 2023

Yeah, I am beginning to come around to the idea that there will always be altcoins just like there will always be many types of scams and copycats. Really the only fix is education so... that's why I've come around to this perspective. People are lazy until they are forced to not be lazy. They have to learn lessons the hard way. They will, but there will be new people that will not listen. So if there is a market for scams there will always be scams. Hopefully it trends downward over time.

69 sats \ 0 replies \ @purplereign 13 Aug 2023

won't eradicate but may avert many a wandering soul from falling into the pitfalls of shitcoins..

speaking from personal experience, i had a detour of a couple of years purely because i was attracted by the technical features as to what they might make possible, and ended up spending (wasting) a lot of time before realising the higher level dynamics that are so fucked in that space

i tihnk there are many projects that start out with pure motives, attracted by the enabling tech, but end up tangled up in the shitcoinery

maybe drivechains would help, or maybe shitcoinery spirit would just infect them anyway

69 sats \ 5 replies \ @premitive1 12 Aug 2023

Liquid and RSK have always had the peg-out problem. And the peg-out is also the biggest sticking issue to acceptance of the BIPs underlying drivechains. However, to your point, ordinals definitely took a bite out of altcoins. So while drivechains may not eliminate altcoins, it would likely take some of the attention away from them.

63 sats \ 2 replies \ @iguano 12 Aug 2023

For liquid the peg out is pretty simple using sideswap.io

0 sats \ 1 reply \ @premitive1 12 Aug 2023

Simple, but permissioned, right?

0 sats \ 0 replies \ @iguano 13 Aug 2023

Honestly not sure, I guess is centralized,

13 sats \ 1 reply \ @nerd2ninja 12 Aug 2023

I challenge the assertion that ordinals took a bite out of altcoins, because ordinals ARE altcoins. They're just altcoins that pay Bitcoin tx fees.

69 sats \ 0 replies \ @premitive1 12 Aug 2023

Reasonable assertion. I prefer altcoins that pay fees to Bitcoin miners.

0 sats \ 0 replies \ @BlokchainB 13 Aug 2023

Good take here

0 sats \ 0 replies \ @mallardshead 13 Aug 2023

On the other side of monetization, altcoins proffer nothing.

0 sats \ 0 replies \ @ek 12 Aug 2023

However, this viewpoint misses a fundamental point. Altcoins don't thrive purely due to their technical features. In fact, their primary purpose isn't technical at all. Altcoins mainly serve to profit their founders and early investors.

I think the argument with drivechains killing altcoins is that altcoins can no longer use technical arguments to shill their altcoin.

I think most altcoins advertise themselves as technically superior but not the politics behind.

However, for this argument to work, we need to assume that the general public would be aware of drivechains on bitcoin and what they make possible. Which will probably not be the case since they already don't really understand the difference between bitcoin and altcoins.

0 sats \ 0 replies \ @BTC_Commons 12 Aug 2023

This is the correct take.

The argument that drive-chains would kill altcoins never made sense. Sounded more like a sleaze salesman's pitch, than anything else.