Why Bitcoin Sidechains Are Not Permissionless

Most sidechains (e.g., Liquid Network, Rootstock) rely on a federation of trusted signers to secure the bridge. This creates a centralized chokepoint for censorship and asset seizure, fundamentally breaking Bitcoin's trustless model.

• Key Risk: A 2-of-3 multisig can become a single point of failure.
• Key Consequence: Users must trust the federation's honesty more than Bitcoin's proof-of-work.

Sidechain security is not inherited from Bitcoin. A malicious sidechain validator can mint infinite wrapped BTC, as Bitcoin L1 cannot verify sidechain state transitions. This forces reliance on off-chain attestations or watchtowers.

• Key Flaw: No cryptographic proof of state validity reaches Bitcoin.
• Key Dependency: Security models like Drivechain remain theoretical, while live systems use permissioned committees.

Exiting a sidechain is a permissioned process. The federation or validator set must approve and sign every withdrawal, introducing delays and censorship risk. This is the antithesis of Bitcoin's self-custody principle.

• Key Limitation: Withdrawal times are dictated by committee schedules, not block times.
• Key Contrast: Compare to Lightning Network, where channels enable non-custodial, instant settlement.

Sidechain consensus (often PoS or PoA) and bridge operators are highly concentrated. This leads to regulatory capture and governance attacks, as seen in other ecosystems like Solana or Polygon. The economic model is not aligned with Bitcoin's decentralized miner incentives.

• Key Risk: A handful of entities control the sequencer and bridge treasury.
• Key Metric: TVL security ratio is poor; a $10B sidechain may be secured by a $100M staking pool.

Most sidechains (e.g., Liquid Network, Rootstock) rely on a multi-sig federation to secure asset transfers. This creates a permissioned checkpoint that can censor or freeze funds. The security model reverts to a trusted committee, not Nakamoto Consensus.\n- Security Model: Trusted Federation (e.g., 11-of-15 signers)\n- Failure Mode: Single point of censorship and confiscation\n- Contrast: Bitcoin validators are permissionless; sidechain validators are whitelisted.

Moving BTC to a sidechain requires locking it in a bridge contract or multi-sig. This creates a centralized liquidity pool vulnerable to exploits (see Ronin Bridge, Wormhole). The bridge operators become de facto custodians of billions in BTC.\n- Architecture: Custodial Bridge with Federated Validators\n- Risk: Bridge is a high-value attack surface for hackers\n- Data: Major bridge hacks have exceeded $2B+ in total losses.

Sidechains do not inherit Bitcoin's hashrate. They must bootstrap their own validator set, often leading to low Nakamoto Coefficients and vulnerability to 51% attacks. Security is parasitic on the federation, not sovereign like Bitcoin.\n- Security Source: Independent, often Proof-of-Stake or Federated PoA\n- Attack Cost: Can be as low as thousands of dollars vs. Bitcoin's billions\n- Example: Early sidechains like Liquid have ~15 federated signers; a compromise of 8 can steal all locked BTC.

Drivechains (BIPs 300/301) propose a miner-voted, permissionless sidechain model. However, they remain theoretical and face significant political and technical hurdles for Bitcoin activation. They highlight the trade-off: true permissionlessness requires deep protocol changes.\n- Mechanism: Bitcoin miners vote on sidechain withdrawals via blind merged mining\n- Status: Not deployed; requires a contentious soft fork\n- Trade-off: Introduces new complexity and miner governance into Bitcoin core.