RSK, the Ethereum-like sidechain for Bitcoin developed by IOVlabs, is evolving. The federal pegging mechanism, which is based on Bitcoin (multisig) multicast address, migrates to a system that leverages hash power through RSK’s new special-purpose hardware security modules.
“We are very excited with this release as it is a major step towards a fully decentralized smart contract platform on top of Bitcoin,” said IOVlabs Chief Scientist Sergio Demian Lerner, Bitcoin Magazine. “This is something the ecosystem needs.”
Sidechains And Two-Way Pegs
Bitcoin sidechains are alternative blockchains with tokens pegged to bitcoin; one token can always be exchanged for one bitcoin, so their values should be the same. However, sidechain can be designed with different protocol rules. RSK’s sidechain uses many Ethereum rules, enabling smart Turing-complete contracts.
RSK is merged by a subset of all Bitcoin miners, with a majority of Bitcoin miners (by hash power) currently participating. They use their existing hash power to generate sidechain blocks, and earn some additional transaction fees by doing so.
RSK tokens, known as “bitcoin on RSK” or rBTC, are supported one by one by actual bitcoin on the Bitcoin blockchain (BTC) by locking bitcoin up in a multi-rock address on the Bitcoin blockchain to issue an equal amount from rBTC. on RSK (“peg-in”). This happens through an RSK smart contract called the “bridge contract” which keeps track of Bitcoin’s multitasking address. Unlocking the BTC only occurs when an equal amount of rBTC is locked up by sending it back to a RSK (“peg-out”) bridge contract.
A “federation” of reputable cryptocurrency businesses holds the keys to Bitcoin’s multi-rock address. (The original announcement included 24 companies, of which an unknown subset is currently participating.) There is a mutual trust to unlock BTC from the multicast only when there is an equivalent amount of rBTC locked up. But technically, they could collude and steal the contents of the multicast address, leaving rBTC holders without the option to exchange their sidechain tokens for real bitcoin.
In the new RSK upgrade, Powpeg, the multi-stud will be managed by a larger group of high-profile companies (called “Pegnatories”). Each of the Pegnatories runs a special-purpose hardware security module that holds the signing keys (called “PowHSMs”). These modules will only unlock bitcoin from the multisig if the equivalent amount of rBTC is locked by sending them back to the RSK bridge contract. a if this RSK transaction has 4,000 confirmations (which is almost equivalent to 200 Bitcoin confirmations). The hardware modules ensure that the peg-out transaction has 4,000 RSK confirmations by checking the RSK Simple Payment Check (SPV) test.
Without 4,000 RSK confirmations, or without the cooperation of a majority of PowHSM holders, the bitcoin remains in the multi-core. (Powpeg is what IOVlabs calls a “vet.”)
“The Powpeg is adopting a detailed security protection approach, stacking security layers, as a Bitcoin hash rate confirmation of pegs,” said Lerner. “This allowed us to achieve a unique multi-signature vault with time-delayed transparent and auditable access. I think this is very important because the devolved financial system must be built on the strongest security foundations. ”
The identity of the high profile companies that will operate as Pegnatories will be announced over the coming weeks. After that, additional technologies could be developed to further decentralize the peg, including the ability to unknowingly introduce competing pegs.
RSK, formerly known as “Rootstock,” was launched in January 2018. The sidechain currently supports all types of smart transactions and contracts that Ethereum supports. This also means that it supports any programming language that can be used for Ethereum, such as Solidity, Julia and Vyper.
As decentralized finance (DeFi) solutions where consumers can borrow, borrow and trade coins become popular in the Ethereum community, IOVlabs hopes to bring these use cases to Bitcoin via RSK.
“We believe RSK should be DeFi’s preferred platform for bitcoiners. We are committed to the spirit of an ecosystem and the mindset of devolution and security, and we want to make financial opportunities based on bitcoin and bitcoin accessible to all. “
With Powpeg representing another step towards devolving the RSK sidechain, IOVlabs is still planning to eventually convert RSK into a ‘drivechain’: a hash power-assured sidechain, with two Enhancement Proposals Bitcoin (BIPs) offered for them. Instead of a federal system (with or without secure elements), “moving” coins between the Bitcoin blockchain and the sidechain would be based on hash power only. Lerner said it would be very easy to update the current RSK design to ‘drivechain’.
For more information on Powpeg, see also this Medium post by Sergio Demian Lerner.