Yes, this.

There are numerous examples of what you describe, where foundations are formed over many decades and then come together in a manner that both appears sudden but also has continuous expanding impact. Take the internet & mobile computing for example, there were numerous advancements in many fields, network theory, computing, radio communications, displays, etc over many decades prior to the mid-late 90s. Then all of a sudden they came together to form global internet connectivity with mobile devices. The change appeared fast, but only to someone not involved with the foundational advancements. I don't even know how I'll describe to my kids what life was like before the internet and smartphones.

There was a semi-famous Russian scientist (forgot who) who complained several years ago that Apple/Steve Jobs didn't really create or invent anything and that the iPhone/iPad were nothing. What he was really saying is Apple simply packaged together a bunch of existing technologies, and was receiving out-sized credit & reward compared to the foundational work that came prior.

Satoshi similarly brought together a large mix of existing technologies to form Bitcoin (in a very elegant fashion). For example, could bitcoin work without mobile internet connected devices? Probably not since I'm not sure how cash style transaction could easily be performed. The list of things that need to be in place is quite long.

I am beginning to wonder if many of the public proponents of sound money that were promoted as alternative experts many years ago, were nothing but sales men for their own gold products. That they are not adherent defenders of the principles of Austrian economics, but instead are simple promoters and it just happened that sound money was nothing more than words that they found their target customers most responded to. Peter Schiff comes to mind.

If this is the case, then of course it makes sense to try and tie Bitcoin to gold which then acts as a conduit for your gold interests. Overall I think Bitcoin is exposing who is truly interested in changing the current corrupt system vs. who has just been promoters for their own interests (whatever they may be).

That seems to be the core disagreement, and I don't believe that SC's do break that aspect. Jumped back in after switching to silent observer for a while since I thought we were taking a break from SC for now. But if not then I'll try to reply on this tonight. Day job is killing me recently.

Very well stated, thanks.

What continues to be missed by Mauldin and others is that any sound money construct has to be contained wholly within itself with zero external dependencies. The problem with "backing" is the backing mechanism (whatever it is) becomes the weak point which must be trusted. For example, the FED originally was sold as a trusted entity that would back paper dollars with gold, however by 1932 the amount of FED paper liabilities was so far beyond physical actually held, that the FED was forced to default on it's obligations. Backing Bitcoin with gold is no different than backing paper dollars with gold, it doesn't work.

There is a reason we have the phrase "cold hard cash", it came from many generations learning to not trust "backing".

When Mauldin argues to back bitcoin with gold what he is really saying is "I want the world to use my version of sound money (atoms of gold) and not your version of sound money (Bitcoin ledger), but since physical gold is too difficult for your average person to use now I need your technology". However if Mauldin wants to recreate the gold standard, then the hurdle is to get the majority of the public to use physical gold (not paper products based on physical), this is a difficult hurdle.

The brilliance of Satoshi's Bitcoin is he designed the hurdle for your average person to directly use a sound money system to be very very low, lower than any sound money system we've ever had access too. That is proving to be a level of understanding real world economics that is beyond the vast majority of today's economists.

I think people forget that the P2P network is just as much a part of Bitcoin's protection mechanism as block mining is, if not the most important part. And the P2P network remains quite decentralized (I currently have 2 nodes running, one at home and one in AWS and neither mine for blocks)

The blockchain created by miners functions as the network wide official historical record. It enables newly joined nodes to compute the current ledger state to join the network, and prevents a poorly connected network from having separate node groups diverge.

But it is nodes on the P2P network who: Validate transactions, Transmit transactions across the network (and to miners), Block double spend attempts (the network quickly agrees on the "first" spend), Validate mined blocks and Monitor/track re-orgs.

We could have a single miner left, but the P2P network would still function as a mechanism to keep that miner honest. As long as that miner included all valid transactions from the network's memory pool and did not issue block re-orgs then Bitcoin is OK. If that miner tried to a) reject certain transactions (never include certain trans in blocks), b) issue double spends (insert trans into a block that conflicted with the P2P's selection), or c) re-write history (by re-organizing farther than 1 block back), then any of this would be very visible to the P2P network and the network could collectively decide on a more honest blockchain mechanism.

Mining can become more centralized because their actions are very visible and more importantly validated by decentralized peers, which any of us can participate in. That is the meaning when we say Bitcoin is decentralized, it is that we all can participate in the network's validation, mining is one aspect of that validation but not the only aspect.

As a thought experiment try comparing Bitcoin with only a few miners plus the P2P network, to either the FED or the London bullion depository. Even in that scenario Bitcoin is infinitely more visable and verifiable than either FED dollars or gold bar existence/ownership.

If there are billions of these SC as you say, the vast majority will be so small that the failure of any one would hardly even be noticed. Today there are tons of bitcoin website services and lots of them have gone down/disappeared/etc. Most were so small they were not noticed (I'm speaking to you betsofbitco.in)

That's a great way to put it.

It also means the problem already exists today. What is different between coinbase failing and a sidechain failing. I'd propose very little.

When MtGox failed, a lot of the press said Bitcoin was hacked even though we know that wasn't the case. A SC failing will be very similar.

It's not that it isn't a problem, it's that it isn't a NEW problem.

These are consistent statements. There is a single ledger of separate services.

Also, in your example, how does 1:1 convertibility between sidethread 1.0 and 2.0 and the main thread work, because without that they are alt threads and are thus inflationary.

These are separate threads.  

The thread above is regarding perceptions of fault by ordinary users and will Bitcoin beheld responsible for loses (which decreases trust) or will Sidechains be held responsible.

The link'ed thread was regarding the 21M cap protection and whether or not that concept is lost in SC. I've maintained the bitcoin mainchain will protect that.

Confusion between "did Bitcoin fail me and lose my coins or did a Sidecoin fail me and lose my coins" is a very legitimate issue. I'm worried about this also.

I think a lot of side chains will be seen as services beyond the main chain. For example today if one wants to anonymize coins they need to go use some sort of mixing service, if they lose their coins in the process the service takes the blame though, not bitcoin. I think sidechains will be the same, people have bitcoins and then decided to use some anonymous sidechain service, if they lose their coins I think it will be clear it was the sidechain / service at fault.

If a sidechain is integrated into Bitcoin-qt or blockchain.info to the extent that you're not even aware of the sidechain being used, then I can see the scenario you're describing as being confusing and damaging to Bitcoin. But I think SC's will be implemented in a manner that it is clear when they are being used.

At least that is my expectation / hope.

Whether the BTC are transferred to one sidechain or to multiple links of the sidechains, the result is the same. Either:

1) Bitcoin is the backing reserve asset to any linked scBTC. If so then convertibility is maintained and Bitcoin functions as the security mechanism, or

2) scBTC jump from SC to SC (as your example) and one sidechain in the link breaks, which breaks the link back to the underlying backing BTC. This however in effect converts that scBTC into an altcoin, those scBTC are no longer convertible with BTC and Bitcoin is no longer providing the underlying security.

Such a situation converts a SC into an altcoin.

I'm fine with that because the market is showing how network effects are slowly crushing altcoins. Once an SC converts into an altcoin, it now loses all network effects and is cast off on it's own. It now functions separately from the entire bitcoin ecosystem and can not be used with that ecosystem. Such an altcoin I believe will lose value and diminish to nothingness. You can't hide this from users, they are now locked out of the rest of the bitcoin ecosystem, that is huge.

Altcoins scare the crap out of me, the are the only threat to the Sound Money principle. But as stated before network effects seem to be properly working, I expect that to continue.

The pegging mechanism ensures convertibility, which exposes if the sidechain is #1 or #2. If a sidechain breaks convertibility, it becomes #2 it is now an altcoin.

OK, so you're saying that the media and public view would be that "Bitcoin failed!!!" if a sidechain went down, and that would damage the ecosystem.

Yes, I agree a lot of people would do so and interpret it this way. I think these would be the same people who say Bitcoin is a scam today. I think smart people would separate that Sidecoin A went down but Bitcoin is fine.

But I think the best answer is brg444's earlier comment that no sidechain will get large enough to cause a big public blowup unless it itself is as strong at Bitcoin. If sidechain A has 50% of BTC as your example, I'd be just as confident in it as the current Bitcoin mainchain.

Yes sidechains could be anything from legit coins to complete scams, but why does that matter?

I think the question is whether or not sidechains need to be honest and help secure the economic cap. If sidechains are needed to secure the ledger and secure the cap, then yes we have a disaster in the making because by definition sidechains can be anything (as you pointed out) and can't be relied on.

But I don't believe that is the case. I believe the core protection mechanism is still the bitcoin mainchain which tracks where all 21M coins are. Sidechains that are scams will experience bank runs because the Bitcoin mainchain is where honesty and security is enforced. That was the point of my example in the previous page where some sidechain created millions of dishonest scBTC, the bitcoin mainchain would expose the scam/fraud.

Bitcoin is the reserve asset. Reserve assets don't prevent fraud, but force fraud it to eventually come to public light. I trust bitcoin to enforce correctness in sidechains by functioning as a reserve asset to sidechains, I don't trust any sidechains to do so.

Completely agree it is not a realistic example.

It was just a statement that even in the worse case scenario the economic cap would still function, to say that sidechains ledgers don't change the reserve asset quality of bitcoin cap.

Hmmm, I'll have to chew on that a bit.

Not entirely sure, interesting question. It might have the same effect as if a shipment of gold from the US to Germany was sunk and permanently lost at the bottom of an ocean trench.  It is a complete loss for those involved, but increases the value for the other 50% by removing supply from a fixed stock. Such an event wouldn't have stopped gold being used in 1880, it would have made people more careful with their gold.

So I think this event would make people be much more careful in using sidechains because sidechains introduce another layer of risk. Such an event might actually drive demand away from sidechains and onto the mainchain.


To me the main risk of sidechain ledgers is if a bad sidechain creator tried to artificially inflate the supply. 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. They could do this because this sidechain is not transparent in structure and no one would notice for a time.

This greatly damages the store of value property.

But only until the attempt was exposed. I think every attempt like this would fail, in the same manner as banks used to fail in runs. Some people would get concerned and transfer back to BTC. But the sidechain only has 1M BTC in reserve for 10M scBTC liabilities. Very quickly the 1M BTC would be exhausted or the convertibility window would close. Both actions would expose the fraud and the remaining 9M scBTC would quickly be priced to their true value (zero).

This is how fixed reserve assets function, they don't prevent fraud, they just force it to eventually come to public light. (The problem for fiat today is there is no forcing function).

Yes you may not be able to see what is happening off the main chain. (In the case of a zerocoin sidechain that would be the whole point BTW)

But my understanding is you would be able to see that the coins were moved to a sidechain and that is all you need for a global view. i.e. Bitcoin's main chain has 18M coins located at these UXTO, 1M coins on sidechain A, 1M coins on sidechain B, 1M coins on sidechain C. All 21M are accounted for.

The reason I'm saying that is a complete view is all 21M coins are accounted for visibly. The fact that you may not know what some of them are doing on sidechain B or who has them is not an issue, their existence and location on which chain is still known.

This might just be semantics....

That makes complete sense, I get the concern.

I guess I think the risk exists with or without Blockstream going first. There will always be moneyed entities lobbying to change things to their benefit. Whether or not sidechains happen will not change that. Just look at DC.

I also think sidechains decrease the level of influence external interests have by providing another outlet to make changes. Take paypal for example, today if paypal wanted to do something they'd have to lobby the core developers and community. With sidechains the community would rightfully respond that no changes are needed because paypal could now just implement a sidechain.

So I see sidechains as reducing the need for moneyed interest to change bitcoin by providing an easier alternative to implement, sidechains become the path of least resistance. And for the community participation is optional (which is a good)

We completely agree on the need to be slow and careful and make sure the both the choice of which technology and what implementation be done with strong confidence that the choices made are better than any other alternatives. I've felt that in this thread there is a reaction to not make any changes or even explore options.


We agree these are the main items to address in the near term. I just believe they are not the only changes needed.


We disagree that the bug issues can ever be fixed adequately in the current development process. The whole problem it is they are part of the specification by default and because such an unbelievably massive effort to required to change anything, that the default is to leave them in.


I guess I see features as the main/only method to compete with fiat. As discussed earlier in this thread, fiat was a technological innovation over gold in terms of many ease of use aspects.

If we are to out compete with fiat, implementing more technological innovations is the best method. It is also replicates the method fiat used to take down gold.

Long discussion by Greenspan on Gold.

http://www.cfr.org/financial-crises/conversation-alan-greenspan/p33699

He's now sounding like a gold bug, probably because he is trying to re-position his legacy since he knows that his fiat paper will fail, largely due to his own actions.