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The original was posted on /r/cryptocurrency by /u/Jcook_14 on 2024-01-10 01:12:56+00:00.
TLDR at the bottom
I want to explain a bit of the vision, for the future of mainnet Bitcoin and I’m curious to hear the perspectives of others. I will do what I can, to go into great detail, and explain thoroughly, why I believe:
- The future of the mainnet Bitcoin Network isn’t necessarily as a medium of exchange, except in cases where the individual can afford the future high fees. Rather, I see Bitcoin mainnet as a source of security for PoS chains to time-stamp transactions or proofs onto, in order to make their chains more secure and censorship resistant.
Bitcoin scalability issues
It is obvious now, that Bitcoin Mainnet is inevitably going to have further scalability issues, as adoption accelerates. This issue isn’t very controversial, it is something that has lead to the creation of various Bitcoin sidechains. However, it is important to establish this point. The use case of medium of transfer for BTC will likely not end up being on the mainnet Bitcoin, rather on various outside blockchains and sidechains. Some of these, even settle or timestamp transactions on Bitcoin. However, not all will.
Chains like Lightning, Ethereum (and it’s Rollups), RSK, Stacks, Nomic, Avalanche and any other chain with Bitcoin bridging capability are chains that will be able to take on the demand for day to day, medium of exchange for BTC.
In a future where BTC tends to be used off-chain. Mainnet will need to find a dominant use case.
In a future where BTC is used off mainnet, there is a need for transactions to continue to come through mainnet, in order to keep fees bein paid to miners and hold demand for BTC as a fee token on mainnet. There should be some transactions happening, from sidechains, and that could provide some volume to continue to make mining on mainnet valuable. However, there is another possible avenue to keeping mainnet filled with transactions. This new avenue is called Bitcoin timestamping for PoS chains.
Why would it be useful for PoS chains to have their transactions time-stamped on Bitcoin?
Proof of Stake vs Proof of Work, come with multiple trade-offs but potentially one of the most fatal consequences of PoS, is that, with enough stake, a malicious party may be able to censor the chain and reorganize the transactions and network. A reorganization in this manner, would likely lead to a fork, and it’s hard to bring back trust into a chain after such extreme circumstances have occurred on a blockchain. These trade-offs are very serious, and lead to many people to believe that PoS is inherently flawed, because of this potential security risk, especially regarding low market cap chains.
However, PoW doesn’t have this same tradeoff. Rather, in order to do a reorganization, an entity would have to acquire 51% of the hashing power, which is unbelievably expensive in terms of equipment and power consumption.
However, the tradeoff here is, that it takes much longer to get to finality on PoW chains, and this makes running at more than 10-50 TPS, is not very feasible without centralization of the nodes and drastic changes to node structure. This is an important security factor, that leads to how PoS may be able to benefit from Bitcoins PoW finality, and Bitcoin can benefit from PoS chains ability to run at higher TPS and settle with faster finality.
The mutual benefits of Bitcoin time-stamps
So we established the trade offs of both PoS and PoW, however, what would happen if you were to timestamp, a proof of each PoS transaction that is done onto the mainnet Bitcoin chain? This would actually change the PoS landscape, as it would mean that an entity would no longer be able to reorganize the chain, without there already being proof of the original structure already being in existence on the Bitcoin blockchain. Meaning that if a malicious entity wanted to totally reorganize, the network can fork and utilize the proofs from the proofs time stamped on Bitcoin, to recreate the accurate version of the chain.
This makes PoS chains that much more secure, by leveraging Bitcoin mainnets superior immutable nature. This could change the way that PoS chains derive immutable transactions, and can significantly alleviate unbonding times for staked assets. This also means that, if many different forms of sovereign blockchains or Rollups exist in the future, they will be able to utilize the ultimate source of truth for transaction accuracy, the Bitcoin mainnet. These chains will also have to pay Bitcoin mainnet for this time-stamping. Meaning that many different chains could be paying Bitcoin mainnet a lot of money for this service, making miner revenue from fees, all that more profitable with the added transactions.
Is anyone actually working on this?
There is one organization that I know of, building this type of functionality. They are actually building a sovereign blockchain in the Cosmos ecosystem called Babylon, which will allow for blockchains to submit a proof to Babylon, after which, Babylon will then timestamp this proof onto Bitcoin mainnet.
The range of unbonding times for Cosmos ecosystem chains, is around 14-28 days. But those unbonding times could go down to a day or in some cases, less than a day, with the service that Babylon provides.
This is a pretty incredible innovation for PoS chains that has large implications for the immutability of PoS chains, a rightful criticism of these chains. However, time-stamping to the Bitcoin mainnet, should change the narrative around PoS chains. It should also change the narrative that Bitcoin fees getting to high, is inherently negative for Bitcoin mainnet. The users of the future for Bitcoin mainnet may not be people or corporations, but rather, Proof of Stake blockchains.
Thanks for reading
TLDR;
Proof of Stake blockchains time-stamping proofs of their transactions and their ordering to the Bitcoin mainnet will be a new paradigm shift in how PoS chains derive their security.
It will allow for PoS transactions to become more immutable due to their proof of existance and proof of ordering on the Bitcoin mainnet. While also bringing new value and fees to the Bitcoin mainnet blockchain due to the need to include these proofs into Bitcoin blocks.
