From: ryan@breen.xyz
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Date: Tue, 15 Aug 2023 22:02:38 -0400
To: bitcoin-dev@lists.linuxfoundation.org
Subject: [bitcoin-dev] Sentinel Chains: A Novel Two-Way Peg
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Recent discussions on social media regarding drivechains have prompted =
me to consider the implementation of a two-way sidechain peg within the =
Bitcoin protocol. I would like to propose what I believe may be a novel =
solution to this issue.

I have previously written about here on my blog: =
https://ursus.camp/bitcoin/2023/08/10/sidechains.html
And here is the Stacker News discussion: =
https://stacker.news/items/222480

Nevertheless, I will hit the high points of the concept here:

The most challenging problem that BIP-300 aims to address is how to =
establish a two-way peg without involving a multisig federation and =
without requiring miners and full nodes to possess knowledge about the =
sidechain or run a sidechain node. This is, in fact, a very difficult =
nut to crack.

The method adopted by BIP-300 involves conducting sidechain withdrawals =
directly through the miners. To prevent miners from engaging in theft, =
the proposal mandates a three-month period for peg-outs, during which =
all miners vote on the peg-out. The intention here is to allow the =
community to respond in the event of an incorrect peg-out or theft. The =
miners are expected to be responsive to community pressure and make the =
correct decisions. To streamline this process of social consensus, =
withdrawals are grouped into one large bundle per three month period.

Despite criticisms of this proposal, I find it to be a viable and likely =
effective solution. After all, Bitcoin's underlying mechanism is =
fundamentally rooted in social consensus, with the only question being =
the extent of automation. Nonetheless, I believe we now possess tools =
that can improve this process, leading to the concept of Sentinel =
chains.

The core idea is that sidechain nodes function as Sentinels, notifying =
full nodes of thefts via a secondary network. These sidechain nodes =
monitor the current state of Bitcoin blocks and mempool transactions, =
actively searching for peg-outs that contravene sidechain consensus in =
order to steal funds. They transmit invalid transactions or blocks to =
public Nostr servers. Bitcoin full nodes wishing to partake in sidechain =
consensus can run a small daemon alongside Bitcoin Core. This daemon can =
monitor public Nostr nodes for messages about invalid transactions and =
then instruct Bitcoin Core, via RPC calls, to ignore and not forward =
those invalid transactions.

Full nodes can choose any group of individuals or organizations to =
receive updates from Nostr. For instance, a full node might choose to =
trust a collective of 100 sidechain nodes consisting of a mix of =
prominent companies and individuals in the sidechain's sphere. Rather =
than relying on a single trusted group, full nodes form their own =
decentralized web of trust.

This reverses the conventional model of two-way pegged sidechains. =
Instead of requiring nodes to monitor sidechains, sidechains now monitor =
nodes. In this sense, it is akin to drivechains, with the difference =
being that peg-outs could be instantaneous and individual, without the =
need for the three-month gradual social consensus. Furthermore, a single =
daemon can be configured to monitor notifications from any number of =
Sentinel chains, rendering this solution highly scalable for numerous =
sidechains.

In summary, drivechains:

- Require an initial consensus soft fork
- Treat each new sidechain as a miner-activated soft fork (easier to =
deploy but more centralized)
- Feature withdrawals occurring in three-month periods
- Involve withdrawals in bundles
- Exclude Bitcoin full nodes from participation in sidechain consensus
- Are currently production-ready

Sentinel chains:

- Require no initial soft fork of any kind
- Permit each new sidechain to be miner-activated OR user-activated =
(more challenging to deploy but more decentralized)
- Allow instantaneous withdrawals
- Facilitate individual withdrawals
- Enable Bitcoin full nodes to engage in consensus
- Are only at the concept stage

Sentinel chains could potentially offer substantial advantages over =
other forms of two-way pegs, primarily in terms of speed and efficiency =
of consensus. Moreover, they align more closely with Bitcoin's =
principles by ensuring that power remains within the realm of full =
nodes. Lastly, they shield Core-only users from potential bug =
consequences stemming from consensus changes directly implemented in =
Bitcoin Core, possibly fulfilling the long-awaited promise of a fully =
opt-in soft fork.


Ryan Breen
Twitter: ursuscamp
Email: ryan @ breen.xyz
Web: https://ursus.camp