if most of the transactions occur on OT then the danger is even greater for miners considering unlike SCs they do not get to mine and profit from OT, correct?
not really, just think of an exchange, they have many more transactions than the Bitcoin blockchain can process, they have there own servers and internal accounting system (it could there own PoS coin or somthing like the NASDAQ) all OT does is ensure that your balance locked and released when cretin criteria are met with a N of M script your bitcoin can be moved. in this application it is similar or indistinguishable from a decentralized exchange using SC. An alternate currency for example - with OT would be a for profit company - say for example a micro transaction currency, what OT would provide is a trust free way to secure your BTC, there internal servers or blockchain ledger would manage the system - risk, demand and competition would keep scales appropriate, and there dev team could trim the block chain as needed. if there micro payment coin was in high demand there would be an exchange rate floated either on the market or set by the company. but the above example with a SC would run at the prototypical level, and be totally decentralized the design of the coin would most likely be merged mined to incentivise mining, over time it will generate more revenue for miners than Bitcoin, the result is there is a motivation to mine and secure the SC's as they grow, the Bitcoin chain can be MM but if it gets to a point where it docent generate enough revenue because the revenue is generated on the SC, it will leave bitcoin vulnerable to exploration or attack. this is the trade off with SC, the trade off with OT is market competition, you have to earn you way to the top, you cant boot strap you way up by getting something for nothing (mining) and risking Bitcoins incentive sachem. and regarding inflation on a SC. yes indeed there could be, but if there is then it becomes much like any other altcoin and this inflation does not affect the BTC ledger.
to be taken in context with the previous discussion, if the SC is more valuable it is a reason not to transfer back. so yes basically you just confirmed my two arguments. 1. OT is very much more centralized than SC 2. The danger of the majority of txs being handled off blockchain and removing the incentives for miners to mine any network is far greater than them potentially choosing to prefer mining a particular SC other than Bitcoin. Here is an example where I will use your argument against you. Consider two solutions : a fast transactions sidechain and a fast transaction OT coin. Using the first solution, the sidechain, miners are incentivized to mine both chains, the mainchain and the sidechain. In my own, more pragmatic world, they benefit from both as both work in synergy and the potential for the sidechain to take over the main one along with its mining power is slim to none. But just to entertain your scenario let us assume it does happen and an exodus to this new chain happen. Miners are still providing the security for a new mainchain and are incentivized to do so. Now using the second solution, the fast transactions OT coin. It could indeed be a cool solution for awhile but since we have to consider both extremes, then we should also assume that by some strech of the imagination users would somehow have no use for the BTC mainchain and want to use only the OT fast transactions coin. The problem with that scenario is that miners are left with no txs at all to mine. All the transactions are essentially occuring off-chain. Remember this is a scenario you have yourself championed and argued that once the block reward for BTC decreases or disappear then miners would be left with no incentive to secure the chain and would abandon it but this time, without any chain to turn to. Don't you think that's a bit problematic. Do you see why SC is the better option? |
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Maybe so, but don't expect Keynesians to just throw in the towel. They will entice BTC owners with wonderful exchange rates. They will offer insurance. They will offer miners Quantitative Easing. All the while they will be hoarding BTC for reasons of National Security.
but there's a lunatic in Risto's thread saying BTC is the government's creation  surely they'd want use using it no ?  |
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I don't see any businesses selling pirated songs or movies, because only the legal ones have value. I don't see Americans using Pesos. Nobody will sell a currency if it is not liquid enough to use in a brick and mortar store. Just like every other foreign currency, you will be asked to leave it at the border.
But my friend we are in CRYPTO world! If they want to force the use of cryptofiat upon every businesses in the country then let them do it. Let's use your analogy with Pesos(BTC). Remember there are no borders in CRYPTOworld. So imagine that I have this magical wallet that contains only Pesos(BTC). Any time I have to pay in an american brick and mortar store that only accepts USD(cryptofiat) my magic wallet automatically transfers my pesos(BTC) into USD(cryptofiat). The merchant receives cryptofiat, hands over the good to me and we are both happy! Maybe you didn't notice that I was agreeing with you in the point that people will chose a 1:1 if they have a choice. Your magic wallet not may not exist if the cryptofiat is not exchanged outside of legal channels. All I'm saying is that we should expect states to ban 1:1 pegged cryptocurrencies at first. I'm sorry, I indeed was not sure how to interpret your comment. Allow me to apologize for that. If, indeed, the cryptofiat cannot be exchanged outside of legal channel (something I'm quite certain is impossible) then I would also like to know how do you envision the cryptofiat securing its chain? One could suggest they could use coercion and violence to force miners of their country to merge mine it but in a global, crypto world, that is not sufficient and it would render them very vulnerable to a new crypto-future type of financial attack, don't you think? |
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brg444, did you ever address the concern that a utility chain has the chance to permanently attract all tx fees to itself in the long run at the expense of BTC miners who need those tx fees? or is your answer simply that Bitcoin will pre empt that by adopting said innovation before that happens?
I did. Here is my example : if faster tx times is implemented WITHOUT security tradoff to the SC then it makes perfect sense that the mainchain would incorporate the feature natively. since you refuse this scenario, then indeed, as mentionned in the whitepaper, the scBTC might attract considerable, even the majority of the coin. BUT As there are no changes to parent chain consensus rules, everyone can switch in their own time without any of the risks associated with consensus failure. The price of scBTC will NOT riser faster than BTC's since a BTC can claim a 1:1 stake in the SC so they are effectively worth the same. In such a scenario, assuming there are still mining rewards being handed over, the miners will continue mining the BTC chain since they can claim the new, widely used, scBTC 1:1 from the BTC they mine. So essentially, withstanding some VERY particular and farfetched situation, even the last one to jump boat can claim his equivalent stake on the scBTC chain. Of course this implies a security issue in that effectively all of the users would have to export their cold wallets and what not over to the new blockchain. This is why I'm arguing that people will be very reluctant to follow such a mass exodus and that the more likely scenario is that when the mainchain developers realize that the market has voted for whatever feature is included in the sidechain they will fork it onto the mainchain so as to create a less risky transition. Remember that if the sidechain does induce this mass exodus it will need the consensus of all nodes and miners to become the mainchain and so I believe that in this situation, the nodes and miners will simply conclude that a fork of the existing mainchain is a safer proposition. |
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I don't see any businesses selling pirated songs or movies, because only the legal ones have value. I don't see Americans using Pesos. Nobody will sell a currency if it is not liquid enough to use in a brick and mortar store. Just like every other foreign currency, you will be asked to leave it at the border.
But my friend we are in CRYPTO world! If they want to force the use of cryptofiat upon every businesses in the country then let them do it. Let's use your analogy with Pesos(BTC). Remember there are no borders in CRYPTOworld. So imagine that I have this magical wallet that contains only Pesos(BTC). Any time I have to pay in an american brick and mortar store that only accepts USD(cryptofiat) my magic wallet automatically transfers my pesos(BTC) into USD(cryptofiat). The merchant receives cryptofiat, hands over the good to me and we are both happy! |
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how are those cheep coins working for you  OT can be as decentralized as using a BitTorrent client to assess the BitTorrent network, 100% decentralized, and available without a prototypical change why so insistent SC are better? FYI inflation in value on a SC is what prevents one converting back into BTC, one want to use the value enabled by the SC, and if it isn't there you want to convert back the BTC. I will be honest I haven't looked into OT in much details but if I understand it right, can the same concern you guys parade around not be applied to OT as well? If OT gains traction and develops innovative utilities then is it not right that most txs would occur on their network and would be even more dangerous for the miners than SCs? I'm not sure I understand your last comment. Value is not inflated using utility chains working with a 1:1 peg, the ledger is preserved and no additional coins are created. re the last point there need not be value inflation on a SC, but there could be. re. OT it's not a change on the prototypical level, so no risk to the incentives in mining Bitcoin over time. As there will always be as similar risk as there is with SC, it naturally gets priced in in the market. OT in my view enables the vision people see when thinking of Bitcoin as a trust free reserve currency. OT can be a "decentralized exchanges" here is an intro as to how to do it without screwing with the bitcoin protocol. http://youtu.be/teNzIFu5L70?t=1m and some more info. https://www.youtube.com/watch?v=vtJcUM5-TeA thank you, I will look into this but you did not adress my point. if most of the transactions occur on OT then the danger is even greater for miners considering unlike SCs they do not get to mine and profit from OT, correct? and regarding inflation on a SC. yes indeed there could be, but if there is then it becomes much like any other altcoin and this inflation does not affect the BTC ledger. |
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i actually see your point.
what did you mean by the bolded part?
Well I guess someone COULD create a sidechain that is capped at a certain amount of 1:1 units and then if you do not hold any of that stake you are stuck using the sidecoin to use the feature but to be frank I honestly don't see how someone could be fooled by such a scheme. The bolded simply points out that in such a situation another developer could simply clone the feature of the sidechain and make it available through a 1:1 peg with no cap. |
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i know that. i never claimed that a sidecoin needed to be exchanged for BTC. those factors don't change my argument at all, that being Bitcoin miners will be encouraged to MM initially and defect eventually given a successful SC as i have defined it.
to be honest I don't see it. from the quote you posted I understand that a sidechain could contain different units, some that are pegged 1:1 with BTC and others that have a deterministic, floating exchange rate. if that is the case, then I don't see the use case for such a scheme. if one wants to use the feature on such a sidechain then he would want to use the unit which carries a 1:1 peg and not the sidecoin. if, for any reason, the amount of available 1:1 units on that sidechain are limited then someone will clone the sidechain and remove the cap. sidecoins create no incentive for the user, only additional risk. if they have the choice between two sidechains promoting the same feature, one using a sidecoin and the other a 1:1 2wp, then the 2wp wins every time Exactly. A state would choose a sidecoin as (dare I say) cryptofiat. They would exchange for BTC at the border. And ban the use of any other cryptocurrency throughout the country ? You realise this is like saying you can use the internet but please don't download songs. |
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i know that. i never claimed that a sidecoin needed to be exchanged for BTC. those factors don't change my argument at all, that being Bitcoin miners will be encouraged to MM initially and defect eventually given a successful SC as i have defined it.
to be honest I don't see it. from the quote you posted I understand that a sidechain could contain different units, some that are pegged 1:1 with BTC and others that have a deterministic, floating exchange rate. if that is the case, then I don't see the use case for such a scheme. if one wants to use the feature on such a sidechain then he would want to use the unit which carries a 1:1 peg and not the sidecoin. if, for any reason, the amount of available 1:1 units on that sidechain are limited then someone will clone the sidechain and remove the cap. sidecoins create no incentive for the user, only additional risk. if they have the choice between two sidechains promoting the same feature, one using a sidecoin and the other a 1:1 2wp, then the 2wp wins every time Just to carry on this idea, I think this is something most of you fail to realize. Any innovative feature ported to a 1:1 chain will inevitably succeed over a sidecoin. Users will congregate to the safest, most risk-adverse chain and the one with a deterministic, floating peg is certainly not it. Miners will MM only the most popular chain where there is sufficient value therefore there are considerable chances that miners will have no incentive to secure the sidecoins considering it is doubtful they will attract any user in the long run. |
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i know that. i never claimed that a sidecoin needed to be exchanged for BTC. those factors don't change my argument at all, that being Bitcoin miners will be encouraged to MM initially and defect eventually given a successful SC as i have defined it.
to be honest I don't see it. from the quote you posted I understand that a sidechain could contain different units, some that are pegged 1:1 with BTC and others that have a deterministic, floating exchange rate. if that is the case, then I don't see the use case for such a scheme. if one wants to use the feature on such a sidechain then he would want to use the unit which carries a 1:1 peg and not the sidecoin. if, for any reason, the amount of available 1:1 units on that sidechain are limited then someone will clone the sidechain and remove the cap. sidecoins create no incentive for the user, only additional risk. if they have the choice between two sidechains promoting the same feature, one using a sidecoin and the other a 1:1 2wp, then the 2wp wins every time |
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you're not reading properly. a SC with a sidecoin can also accept scBTC. it's the scBTC that have the 2wp, as you say. therefore, any miner mining the SC gets 3 revenue streams; scBTC and sidecoin tx fees and sidecoin block rewards. this is why they will MM and eventually directly mine if enough scBTC appears on the SC.
I don't believe this is quite exact. A SC with a sidecoin will reward BTC locked into this sidechain with a deterministic amount of scBTC (not 1:1). For example 1 BTC will get you 5000 scBTC. From that point on these sidecoins have a floating exchange rate. If the sidechain fails to attract speculators/users than the exchange rate is more expensive ex: it now cost you 10000 scBTC to redeem 1 BTC. For that reason, sidecoins are exactly like altcoins the dev can design the peg and the SC with any properties he wants. he could design the exact scenario i outline; a SC with a 1:1 peg for BTC <--> scBTC that also issues a block reward for a new sidecoin while at the same time processing scBTC and sidecoin tx for fees. this would definitely attract MM initially, and if highly successful, defecting Bitcoin miners who direct mine the SC. The moment an additional coined is issued on the sidechain that cannot be redeemed 1:1 with BTC ALL the coins on that sidechain become sidecoins. |
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how are those cheep coins working for you OT can be as decentralized as using a BitTorrent client to assess the BitTorrent network, 100% decentralized, and available without a prototypical change why so insistent SC are better? FYI inflation in value on a SC is what prevents one converting back into BTC, one want to use the value enabled by the SC, and if it isn't there you want to convert back the BTC. I will be honest I haven't looked into OT in much details but if I understand it right, can the same concern you guys parade around not be applied to OT as well? If OT gains traction and develops innovative utilities then is it not right that most txs would occur on their network and would be even more dangerous for the miners than SCs? I'm not sure I understand your last comment. Value is not inflated using utility chains working with a 1:1 peg, the ledger is preserved and no additional coins are created. |
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you're not reading properly. a SC with a sidecoin can also accept scBTC. it's the scBTC that have the 2wp, as you say. therefore, any miner mining the SC gets 3 revenue streams; scBTC and sidecoin tx fees and sidecoin block rewards. this is why they will MM and eventually directly mine if enough scBTC appears on the SC.
I don't believe this is quite exact. A SC with a sidecoin will reward BTC locked into this sidechain with a deterministic amount of scBTC (not 1:1). For example 1 BTC will get you 5000 scBTC. From that point on these sidecoins have a floating exchange rate. If the sidechain fails to attract speculators/users than the exchange rate is more expensive ex: it now cost you 10000 scBTC to redeem 1 BTC. For that reason, sidecoins are exactly like altcoins |
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brg444,
MM an altcoin as it's defined today is seriously risky and not worth the trouble for Bitcoin miners. MM a sidecoin adds additional badly needed revenue to struggling smaller miners who will be more willing to defect to a sidecoin. the revenue stream will be more easy to envision for these miners. the other difference is that no, Bitcoin miners can't just simply start mining an altcoin today if they wanted to. the altcoin's protocol has to be specifically modified by the altcoin devs to accept Bitcoin DMMS. i don't see them offering this to Bitcoin miners so that's why it's not happening. since sidecoins represent a direct link to the Bitcoin MC for BTC users to convert to scBTC, the process is simpler and worth more to miners b/c they can mine not only sidecoin reward & tx fees but scBTC tx fees as well.
Maybe I should repeat again? Sidecoin = altcoin. Same dynamics. Floating exchange rate with BTC and all. So MM an altcoin more risky than MM a sidecoin? Absolutely not. |
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brg444,
the difference btwn an altcoin as it exists today and a sidecoin that could exist on a SC tomorrow is a direct link to the Bitcoin network via the 2wp. b/c the 2wp guarantees that scBTC can get back to BTC (theoretically), users will be encouraged to migrate to the SC to utilize the innovation and pay scBTC tx fees. and they will be incentivized to stay there b/c of the 2wp. initially, i believe these scBTC will be valued lower than BTC in fiat terms b/c they are indeed less secure and arbing can be expected to drag down the BTC price. however, as time advances and if the innovation is significantly proven to be useful and confidence in security of the SC increases, more and more ppl will convert to scBTC. you yourself concluded this should drive up the fiat price and i agree. this should feed on itself to the point that everyone will perform their tx's on the SC if the Bitcoin core devs do nothing to update the MC with the innovation. this would destroy Bitcoin miners over the long run as their block rewards diminish along with defecting tx fees. how and when will they devs decide to upgrade the protocol? they need consensus which you've already said is impossible. will they do it under pressure, panic? when 40, 50, or 60% of all BTC have become scBTC? maybe it will be too late or maybe it gets blocked by Blockstream core devs b/c their biz model depends on SC development and success? can you imagine how many $millions it would be worth to Blockstream if all BTC hodlers ended up having to move to a SC they had helped conceive and build? who knows, i don't see it as guaranteed and i surely see the process as potentially being conflicted.
MM an altcoin as it's defined today is seriously risky and not worth the trouble for Bitcoin miners. MM a sidecoin adds additional badly needed revenue to struggling smaller miners who will be more willing to defect to a sidecoin. the revenue stream will be more easy to envision for these miners. the other difference is that no, Bitcoin miners can't just simply start mining an altcoin today if they wanted to. the altcoin's protocol has to be specifically modified by the altcoin devs to accept Bitcoin DMMS. i don't see them offering this to Bitcoin miners so that's why it's not happening. since sidecoins represent a direct link to the Bitcoin MC for BTC users to convert to scBTC, the process is simpler and worth more to miners b/c they can mine not only sidecoin reward & tx fees but scBTC tx fees as well.
 You were wrong by your first sentence, should I continue reading? Sidecoins do NOT guarantee that the scBTC can get back to the BTC. Sidecoins have a floating peg and not a 1:1 2wp. |
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It is economically naive to fail to consider that a feature that adds value in one economic condition, may subtract it in another, and that movement of money may follow this with a lag, sometimes a very significant lag due to practical constraints.
Further naivete would be in imaging that this is not happening all the time, and that this effect is commonly exploited. "Economists" here are contemplating only static ideal cases, and implementing regulatory changes in spite of these concerns. Changing the code is changing what ultimately regulates Bitcoin.
With this particular change, it is not so easy to undo it if it turns out to be a mistake. Many Bitcoin may be destroyed. People will make mistakes of trust.
There are many new risks with SC. Lets address them rather than pretend that they don't exist.
You make many sensible comments and let me insist I am not trying to downplay the potential risks of sidechains. My problem is that most of sidechains opponents in this thread are justifying their risk-case with a proposition that involves the creation of coins booted on sidechains. To my knowledge, coins booted on sidechains are the economic equivalent of altcoins and in no way are sidecoins advantaged over altcoins. So in essence, sidecoins are not responsible for that problem and it is misguided to suggest that they are. brg444, what is you critique of doing all the things you like about SC with Open-Transactions http://opentransactions.org/wiki/index.php/Main_Page, and none of the inflation? Utility sidechains (1:1) peg have no inflation and are more decentralized than OT is. I win? |
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SC does not allow inflation. Altcoins allow inflation. SC does not enable altcoin.
Why is it so hard for you people to understand this
irrelevant quote  I know that you can create altcoins on top of sidechains. My argument is they don't enable them to succeed any more than traditional altcoin. And please don't bring up the "yes they will be merged mined" argument.... I would be very disappointed. "irrelevant quote" FYI those were examples of inflation. Inflation on the sidechain is not affecting the mainchain  |
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how will Bitcoin miners ever make make money when SC's are attracting all the tx's?
Nobody ever imagined that SC's would "attract all the tx's". Just the opposite else the two-way peg is meaningless. why wouldn't a SC with an innovation like faster tx times attract all the tx's? and why wouldn't the scBTC stay scBTC with the perceived risk free put (2wp)? and if i'm right, they will be rewarded by staying on the SC b/c the price of scBTC on that SC will start to rise faster in fiat terms than BTC itself as the SC becomes more and more successful. no, your logic fails you again. if faster tx times is implemented WITHOUT security tradoff to the SC then it makes perfect sense that the mainchain would incorporate the feature natively. since you refuse this scenario, then indeed, as mentionned in the whitepaper, the scBTC might attract considerable, even the majority of the coin. BUT As there are no changes to parent chain consensus rules, everyone can switch in their own time without any of the risks associated with consensus failure. [/i] The price of scBTC will NOT riser faster than BTC's since a BTC can claim a 1:1 stake in the SC so they are effectively worth the same. |
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pg 7
If, in the medium term, there
were wide agreement that the new system was an improvement, it may end up seeing significantly
more use than Bitcoin. As there are no changes to parent chain consensus rules, everyone can switch
in their own time without any of the risks associated with consensus failure.
they never address the problem of mining tx fee fragmentation as a result of increasing usage of the SC. how will Bitcoin miners ever make make money when SC's are attracting all the tx's?
duh! they will mine both chains! one more comment like this and you've officially turned into a troll |
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pg 4 whitepaper:
For this reason, Bitcoin’s objective is relatively simple: it is a blockchain supporting the
transfer of a single native digital asset, which is not redeemable for anything else.
so if a chunk of the native digital assets are allowed to migrate to SC's, where will the tx fees come from to pay miners long term after block rewards diminish to zero?
a chunk of the assets != ALL of the assets tx fees will come from miners mining all chains producing holding significant value |
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