Episode 20: RSK, Federated Sidechains and Powpeg

Bitcoin Explained - The Technical Side of Bitcoin

In this episode of The Van Wirdum Sjorsnado, hosts Aaron van Wirdum and Sjors Provoost discuss RSK’s shift from a federated sidechain model to the project’s new Powpeg solution. RSK is a merge mined Ethereum-like Bitcoin sidechain developed by IOVlabs. Bitcoin users can effectively move their coins to this blockchain that operates more like Ethereum, and move the coins back to the Bitcoin blockchain when they so choose. Some Bitcoin miners utilize their hashpower to mine bocks on the sidechain, and earn some extra transaction fees by doing so.The tricky part of any sidechain is allowing users to securely move their coins between blockchains. This is technically done by locking coins on the Bitcoin blockchain and issuing corresponding coins on the sidechain, and vice versa: locking coins on the sidechain to unlock the coins on the Bitcoin blockchain.So far, RSK did this by locking the coins into a multi-signature address, for which the private keys were controlled by a group of well-known companies. A majority of them was needed to unlock the coins, which they were to only do if and when the corresponding sidechain coins were locked.RSK is now switching to a Powpeg model where the keys to the multi-signature address are controlled by special tamper-proof hardware modules that are in turn programmed to only unlock coins on the Bitcoin blockchain if and when the corresponding coins on the sidechain are locked, and the transactions to lock these coins up have a significant number of confirmations.Aaron and Sjors explain how this works exactly, and discuss some of Powpeg’s security tradeoffs.