Understanding Miner Incentives in BIP301

Author: Rob

Introduction

BIP301, or Blind Merged Mining (BMM), proposes a method for allowing Bitcoin miners to help secure sidechains without having to validate their state or even understand what those chains do. This is accomplished by allowing sidechains to submit small, metadata-bearing transactions into the Bitcoin network that request to have their blocks "blindly" merge-mined.

In this article, we explore what changes are needed to support BIP301 in Bitcoin Core, assuming BIP300 (Drivechains) is handled externally. Most importantly, we dive into the core economic incentive: why would miners voluntarily include these BMM requests, and how does the fee market for sidechains emerge naturally?

What Needs to Change in Bitcoin Core

If we isolate BIP301 from BIP300 and assume that the sidechain state and withdrawal bundle validation are handled off-core (e.g., external validator or userland logic), then the required Bitcoin Core modifications are quite minimal:

1. Mempool Enhancements

• Accept a new transaction type or tagged transaction: BMMRequest.
• Store these separately from regular transactions or in a marked subset of the mempool.
• Prevent spam or DoS attacks through policy rules (e.g., minimum fee, size limits).

2. Validation Logic

• Verify the structure of the BMM request (OP_RETURN or similar format).
• Validate the sidechain signature if needed (could be optional).
• Enforce the rule: only one BMM request per sidechain per block.

3. Mining Template

• Extend block template creation (CreateNewBlock) to:
  • Check for valid BMM requests.
  • Choose one per sidechain.
  • Include them in the block's outputs (e.g., as an OP_RETURN).

4. RPC Interface

• Add an RPC to submit BMM requests, such as submitbmmrequest.
• Optionally expose current BMM queue to miners for optimization.

No consensus changes are required, and this can be a soft fork or even initially an optional plugin.

Why Miners Would Include BMM Requests

At the heart of BIP301 is a simple truth: miners are rational actors seeking profit. Since BMM does not force miners to validate sidechains and imposes nearly no cost, any non-zero fee makes inclusion profitable.

Economic Drivers for Miner Participation

1. Fee Revenue

Sidechains attach BTC fees to their BMM requests. Miners can treat them like regular transaction fees. This creates a market for sidechain block inclusion:

• High-fee BMM requests get prioritized.
• Sidechains learn to compete with each other and with L1 transactions.

2. No Sidechain Validation Needed

Miners include a metadata pointer (e.g., block hash) in their block. They don't validate sidechain state, nor track its rules. It's zero-trust and zero-effort.

3. Competitive Advantage

A miner that includes BMM requests:

• Earns more in fees per block.
• Attracts more hashrate over time due to higher profitability.

This reinforces participation without adding consensus risk.

Concrete Examples of BMM Incentives

Example 1: Single Request with Fee

OP_RETURN "BMM|sidechain:X|blockhash:X123|sig:...|fee:10,000 sats"

If this is valid, miners include it in the block and claim 10,000 sats extra. No validation of sidechain block X123 is needed.

Example 2: Competing Requests on One Sidechain

• Block X123: fee 8,000 sats
• Block X124: fee 15,000 sats

Only one BMM is allowed per sidechain per block, so the miner chooses X124. Market logic: highest bidder wins.

Example 3: Multiple Sidechains Competing

• Sidechain A: 12,000 sats
• Sidechain B: 7,000 sats
• Sidechain C: 30,000 sats

Miner includes all three, one per sidechain. Net gain: 49,000 sats for trivial effort.

The Feedback Loop: Dynamic Fee Market

Sidechains monitor how often their blocks are ignored or accepted.

• If ignored: increase BMM fees.
• If consistently accepted: optimize fees downward.

This creates a real-time, decentralized fee market, where inclusion is based on demand, not protocol enforcement.

Final Thoughts

BIP301 offers a lightweight, optional way for Bitcoin miners to profit by helping secure sidechains. With no need for validation, the main challenge is just UI/UX and policy integration in Bitcoin Core. The rest is market-driven.

As long as sidechains have value, they’ll be willing to pay — and as long as fees are paid, miners will participate.

Bitcoin stays secure. Sidechains thrive. Everyone wins.

References

• BIP301: Blind Merged Mining