Handcrank

Handcrank would require a minimum of 51% of miners run some software which embeds a new bitcoin public key into the coinbase of every bitcoin block they mine. Any user wishing to peg in to the Handcrank chain can select 51 pubkeys from the last 100 mined bitcoin blocks and use them to construct a 51 of 51 musig pubkey. With this pubkey in hand, the user can create a bitcoin “deposit address”, which can only be spent from using a “mega signature” that is valid for the musig key.

Pegging funds into Handcrank

When the covenant is ready (i.e. when the user has all the signatures), the user deposits their bitcoin into the musig address and creates a corresponding message on the Handcrank sidechain.

The message to unlock the funds on the side chain is paid for by subtracting a fee from the user’s amount that was placed into the musig address.

The message announces the user’s sidechain address, the signatories to the multi-sig covenant, and the full text of all of the withdrawal transactions (including all of the signatures) that comprise the multi-sig covenant.

Sidechain nodes detect this message and validate

1. That 51% of miner pubkeys from the last 100 bitcoin blocks are indeed aggregated together in the musig address
2. That they signed all the withdrawal transactions 
3. That the withdrawal transactions all match the specification.

If everything checks out, the user’s sidechain address is credited with an amount of “Handcrank bitcoins” corresponding to however much the user deposited into the musig address, minus the fee for announcing her message.

If any of the above items do not check out, the message is considered invalid and is excluded from the sidechain, and the user’s address is not credited.

Trusting miners to act according to incentives

A Handcrank user and all sidechain nodes validating the Handcrank protocol have trusted 51% of the miners to create a covenant. They trust this covenant to properly hold the user’s money for the time that money is on the sidechain. 

Handcrack is merely a proposal and the consensus method, and the use cases of the sidechain are not defined, but sidechains generally aim to solve problems like:

Reduce infighting 

Development on the bitcoin base chain is slow and methodical for good reason, it holds billions of dollars in value and requires consensus by all parties. When changes are proposed, they can get caught in a vetting process for years before it is implemented or eventually rejected.

Sidechains like Handcrank allow for experimentation instead of trying to change the base layer. This removes existential threats to BTC.

Maintain resource focus

Instead of having layers compete for resources, sidechains allow the BTC main net to function as normal and focus hashrate security where it belongs as well as node consensus. In addition, Handcrank’s use of a multi-sig could provide a healthy payment for miners should these Handcrank side chains be established or closed.

Adding scalability

Handcrank would be its own environment with its own set of rules in how it settles the value pegged into it from bitcoin.

Handcrank could help settle transactions between different parties without the need to use additional base chain resources, adding more transaction volume to the overall bitcoin ecosystem and reducing bids for block space.

New functionality

Once bitcoin has been locked on the base layer and the proof is sent to the Handcrank, that value can then be exchanged using different methods of consensus.

This means BTC lives in a new environment with fewer constraints and gains new experimental abilities, this could be additional privacy, smart contract support and much more.