If the notion is that: "Side Chains are great because people more foolish than I am will mistakenly trust some bad ones, and use them, and lose some of their coins making mine more valuable."  
Than this isn't particularly good for Bitcoin if people lose confidence in it, so whether it may or may not be good for one's own bitcoin value is questionable.

Here is one scenario where BTCs may be lost to MC in this way, essentially rendered unspendable through an economic activity.

1) Some BTC is SPV'd to scBTC₁.
2) Some scBTC₁ is SPV'd to scBTC₂.
3) scBTC₁ is discovered to be a scam (or just a bad implementation) whereas scBTC₁coin massively inflates so that no one on scBTC₂ has any incentive to SPV back from scBTC₂ to scBTC₁ and so no way to return to MC.

(Yes, you can create a side chain from a side chain.)
complexity risks...

Edit:  Is there a way to have such an event without sidechains, or is this a "new" risk?

If you've read every post here Justice nailed it with this post.
https://bitcointalk.org/index.php?topic=68655.msg9448208#msg9448208

I don't for a second believe Austin Hill thinks like you do.

i think the true answer is, "it's impossible to know".  a loss of that magnitude would wipe out alot of Bitcoin's most ardent supporters, eliminate the perception of SOV, and could set the community back 100 yrs.  in that sense, the BTC price could tank.  i know i wouldn't trust crypto devs anymore in my lifetime if i lost scBTC from that scenario.  or, yes, it could "make all our BTC more valuable!"  that's certainly the conventional thinking around here.

the difference with your gold example is that i doubt the Chinese had any idea a Spanish armada ship laden with gold went to the bottom of the Atlantic.  today, we have the internet and the media would be all over it.

not to some around here.  didn't you get the memo?  SC's can only make the BTC price go up, be they scam or legit.

Let's say someone created a centrally managed sidechain, received 1M BTC as 1M scBTC on that sidechain, but then artificially increased the supply of used scBTC on that sidechain to 10M scBTC over time.

Right now low bitcoin price causes larger and larger bitcoin numbers to be dumped by miners to compensate for their costs. This is a vicious cycle that, in my opinion, will be broken only when higher cost producers are eliminated from mining OR there is a sudden increase in buying with the latter being unlikely.

That's a good point.

 You seem to understand Economics. What's your opinion of we lose 50% of all BTC to a SC failure?  

The most promising aspect of sidechains is that they can support decentralization of anything that couldn’t previously be decentralized because of limitations of the Bitcoin protocol.

Sidechains are a major step forward in the Bitcoin network effects sequence. They are one of Bitcoin’s network effects, in that they are the product of developers attracted to Bitcoin and inspired to build on its technology. At the same time, sidechains cause further Bitcoin network effects by enabling unimaginable and facilitating theoretically difficult sidechain-based applications. We are curious to see how sidechains will exponentiate Bitcoin’s disruptive force in the next few years.

i went back to a quote from gmax:

Blockstream's cofounders include 2 of 5 of the people with commit access to the bitcoin core github repo. Or, if you count people with non-trivial contributions to Bitcoin we have 5 people out of hundreds.

the way i understand the github process is that while you may be able to put patches up there freely, nothing can be written to the source code w/o consensus from the core devs themselves.  b/c the vast majority of them now work in one company, there is a potential for them to possibly insert what they want and definitely to block what they don't want.

JR has asked the question about technology that might obsolete the need for SC's and how that might get blocked.  he doesn't think his question got answered satisfactorily.  it is a potential problem that the community needs to address and talk about as it does have real world implications if abused.  they're basically saying "trust us".  it's up to you.

the pessimistic view would be they could all make alot of noise and deception to disrupt consensus if they had enough financial motivation to do so.

it's b/c they have 5 (?) guys who have commit privileges, 3 of which are core devs and all of which could derail any upgrades to Bitcoin from SC innovations for Blockstream profit motives.  that's if you believe it's not critical that Bitcoin stays around while a SC takes over in the long run.

So I have a hypothetical situation, and I’m interested in this community’s input, this is the economic speculation thread after all.  

lets say someone has 1% of all Bitcoin.
lets say they create a Bitcoin ETF, and sell shares to that ETF on the NASDAQ. It takes off. Over time the holding in the ETF go up and down the total holdings never Drop below 1%
In this scenario the ETF Charter promise to back the ETF with Bitcoin it guarantees on redemption to pay in USD at market rate and only under special circumstances will it pay out in BTC.
---
In this hypothetical situation an SC-coin-it has been created, it is Open Source, it has proven utility and security,  faster transfer times, it is highly liquid, in fact it is the preferred transfer of value coin for salary’s and typical larger expenses like TV’s and high end consumer goods because of its faster confirmation times, People still use Bitcoin for purchases like cars and houses – and even pay their loans in BTC – yacht for BTC are selling will in this hypothetical scenario, in fact BTC is used for larger deals where instant transfer times are not a risk. But the SC-coin-it is the preferred means of exchange for anything of value that is relinquished at the point of sale.    

What happens when the ETF, knowing they have 1:1 2wp redemption capability with the SC-coin-it, and 1% of all bitcoins that are stagnant start to leverage their BTC, they are still in theory backed by BTC, but start lending out SC-coin-it to AAA rated entities, they haven't broken there charter due the technicality that the BTC is secure, and they are not lending their BTC ?  

I think that's more a case of a wealthy amateur job going wrong

brg444, how do you want to implement fastBTC using MM ?

goes to show you there are risks to centralization.

I don't know that there are any SC opponents in this thread.
I also don't claim there are any weaknesses in the SPV mechanism, and find it weird that you would see that anywhere in anything I wrote.  
I like SC's, I think it works and does pretty much what it says it does is the blockstream white paper.

There are however risks, some of which have been discussed here already.  Most of the more interesting risks fall into two main categories.
1) Economic risks (changes to miner incentives, centralization issues, and practical concerns, ZB's is one of these)
2) Confidence risks (both "cons" in the scam sense, and misplaced confidence in the mechanism as a panacea, or else misplaced confidence in any particular SC - what you call the altcoin risk, and loss of confidence in Bitcoin generally due to its new ease of change).

As mentioned upthread, the SC mods present a new upgrade path.  Introducing upgrade paths is something to do carefully, and I like that there is this discussion to work through some of the more obvious issues.


There are all sorts of dystopian varieties of these two categories.
Some may imagine a distant future where with a click of a button (or it is done automatically) where one upgrades their bitcoins from Bitcoin 17.4 to 17.5 moving to yet another new chain, and something goes horribly wrong and they find themselves on Central Banker Inflation Coin of something.
Or what is more likely historically, they do this willfully because the news is telling them that it is necessary to do it for their survival in the new important war of the day.

Edit: there is a 3rd category of risk, technical risks (of which SPV brokenness would be an example, but these haven't been much discussed here).

I just really wish that there were more folks doing what they do so that we didn't have to suffer through these sort of conflicts.

While I don't necessarily agree with all of your constructs over the years here, I appreciate that you the potential for and disposition toward thinking.

It does seem to me that Bitcoin infrastructure provisioning is designed such that it will always approach unprofitably no matter what the growth rate, inflation rate, fee structure, etc.

It is worthwhile to note that different classes of entities can accept different levels of profit.  So, an independent enthusiast class individual might be happy to break even and occasionally make a few bucks while this is not an option for a large commercial.  Whatever the case, Bitcoin as implemented simply does not promote the individual class actor very well.

The take-away is that Bitcoin's only realistic hope is for infrastructure providers to monetize some other aspect of Bitcoin's existence.  For large corporate actors this is a no-brainier.  Monetize the intelligence stream as has been a well proven model over the last 15 years.  The big down-side of this is that actors who are able to monetize in this way are distinctly under the thumb of governments, and governments have a very strong propensity to exercise fine-grained control over their citizens.  Governments are inextricably linked to corporations and will be for the foreseeable future.

As I've mentioned before, sidechains would seem to provide a golden opportunity to monetize Bitcoin as a credible source of backing which they require in order to function.  They thus have a significant interest in keeping it that way.

Right now Bitcoin is fairly credible to at least a cross-section of us in the community because it is free of interference (no 'red-listing', transaction discrimination at the mining level, etc.)  Sidechains seem to me like the last best hope of keeping it that way.