Paul Sztorc: Scaling Bitcoin With Sidechains

When I get through to Paul Sztorc on Zoom recently, it’s clear immediately that he’s frustrated. Not frustrated in an angry way – he’s genial and friendly on the line, and our conversation is fascinating. Sztorc is a brilliant Bitcoin developer and he has a thrilling vision of Bitcoin reaching across the entire world and really becoming the backbone of the next stage of civilization. But he’s frustrated, troubled even. And I feel for him a little.

This profile is part of CoinDesk’s Most Influential 2023. For the full list, click here.

This year, Sztorc has been selling the Bitcoin community on BIP 300, a proposal to scale Bitcoin using “drivechains” (or sidechains) that allow transfers of assets between the main chain and secondary blockchains with minimal changes to Bitcoin’s main code. Sztorc says BIP 300 can bring a bevy of great features to Bitcoin, including improved privacy, more tokens and smart contracts, at no risk to Bitcoin’s bedrock principles of decentralization and censorship resistance. But many in the Bitcoin community aren’t having it.

BIP 300, which revises an idea first posted in 2017, was met with fierce opposition from prominent Bitcoiners such as Michael Saylor (MicroStrategy), Saifedean Ammous (“The Bitcoin Standard”), Pierre Rochard (Riot Blockchain) and Cory Klippsten (Swan Bitcoin) this year. And Sztorc is clearly peeved. He thinks his proposals are a sensible way to achieve greater network effects while not disturbing what makes Bitcoin uniquely Bitcoin. He says these critics suffer from a kind of “group think.” Sidechains could allow developers to build permissionlessly on top of the main network, importing new functionality while validating side networks using Bitcoin’s enormous hashpower. “It’s about having a procedural process in the protocol for leaving and going to a different piece of software off the main network. This returns competition to software development,” Sztorc said.

Sztorc, 34, said approvals of soft forks, which introduce new features to Bitcoin without undermining previous versions of the blockchain, are becoming less frequent these days, even though many of the proposed changes are relatively small-bore. “There is nothing controversial about any of the soft forks currently proposed,” he said. “No one has a problem with the content. It’s all a lie. It’s just a fake thing where everyone is afraid to say the truth. It’s too much groupthink. I hope to represent destroying the groupthink.” “Hard money” Bitcoiners, who see Bitcoin’s main purpose as an anti-inflation hedge, tend to be resistant to changes in the code, lest they lead to a dilution of Bitcoin’s decentralization and self-sustaining durability. Michael Saylor, who has invested hundreds of millions in Bitcoin the asset, thinks Bitcoin is a finished product that doesn’t need to be amended. “It’s good enough to be a hundred-trillion-dollar base layer. It’s good enough to be 200x bigger than it is. It’s good enough to be a $500 trillion base layer,” the MicroStrategy CEO said this year.

Sztorc, who grew up near New Haven, Connecticut, said this point of view banishes innovation that would make Bitcoin better. In our Zoom, he lists half a dozen other projects that would have offered greater functionality, had they been approved. Sztorc thinks innovators are being frozen out. He points, for example, to how another proposal, BIP 119, was shot down in 2022, with its proponent Jeremy Rudin choosing to leave Bitcoin development entirely.

“They’re a small minority, but they’re very vocal,” said Sztorc of the conservative voices against changes to Bitcoin’s direction.

With a market cap of $814 billion and 460 million wallet holders around the world, Bitcoin still reigns supreme in the world of crypto. Bitcoin, the asset, has a more than 50% market share and, to the wider public, Bitcoin is crypto, and vice versa. Still, according to Sztorc, we should worry about Bitcoin ossifying into a single use-case “digital gold” project.

“I just think that we need to scale to eight billion people,” Sztorc told CoinDesk. “If we can’t do that, we’re turning some people away. And then no one wants to do that. Everyone wants to be on the same network that everyone else is on. The network effects are too strong. The scalable one will win.”