Softchains: Sidechains as a Soft Fork via Proof-of-Work Fraud Proofs
Originally posted on bitcoin-dev.
This post describes a fully decentralized two-way peg sidechain design. Activating new sidechains requires a soft fork, hence the name softchains. The key aspect is that all softchains are validated by everyone via Proof-of-Work Fraud Proofs (PoW FP) -- a slow but very efficient consensus mechanism that only requires the validation of disputed blocks. This does increase the validation burden of mainchain full nodes, but only by a minimal amount (~100MB per chain per year). It's similar to [drivechains], but without the major downside of having to rely on miners, since all Bitcoin full node users can efficiently validate each sidechain.
Proof-of-Work Fraud Proofs
Last year I posted the idea of [PoW FP to the Bitcoin mailing list] ([follow-up here]). The idea is that we can use the existence of a fork in Bitc