[ANN][XCP] Counterparty - Pioneering Peer-to-Peer Finance - Official Thread

[freedomfighter]

Why will it take 3 days to clear?

First, a significant amount of work needs to be built on the “burn” transaction before it is used to claim the coins on the other chain, for the simple reason of avoiding DoS attacks. Then there is a length of time called the quieting period during which the return transaction and associated proofs are published, but not finalized, and anyone else can step forward with a reorg proof and rollback the transaction. Finally, there is a period of time afterwards analogous to the coinbase maturity where the coins are not spendable because a reorg could undo the peg transaction.

So that's three different waiting periods, each of which would probably be in the range of 100 - 144 blocks, if not more. The exact parameters are not set in stone at this moment, but with that in mind we should expect a peg transaction to take at least 2-3 days to fully clear, depending on the final choice of parameters.

I dont see how this makes any sense.

lets be practical:

Lets say that I bought an ounce of gold for $1000 worth of sidecoin from bitcoin tangible assets on a sidechain.

I paid 2btc for example in both cases. Now suddenly gold went up to $1250 and I'd like to get my 2.5 sidecoins by selling it back to BTA.

I call on BTA and they now need to get some sidecoins to buy from me, since they didnt want to hold any unnecessary sidecoins on a sidechain. so they need to take 3 days to get sidecoins (why would they swap? they cant risk a loss).

I will then need 3 more days to convert back to the main BTC blockchain.

How is this better than conducting my same business via the CP or MSC protocol within minutes and without being more exposed in a sidechain?

even if you tell me that BTA will always keep sidecoins, the same is not always true with other assets that may require a willing buyer to PM me that they are interested and then we will both have to wait 3 days for them to buy and have sidecoins available etc.

If I wanted to turn sidecoins to fiat for some reasons- I now added a 3 day exposure to BTC-fiat volatility that I am not interested in while waiting for the transaction to take place. 

[maaku]

why would they swap? they cant risk a loss

Atomic cross-chain swap has zero risk attached. Zero. It is 100% trustless.

The pegging mechanism merely provides a mechanism for market makers to adjust supply of sidecoins based on demand.

[metacoin]

why would they swap? they cant risk a loss

Atomic cross-chain swap has zero risk attached. Zero. It is 100% trustless.

The pegging mechanism merely provides a mechanism for market makers to adjust supply of sidecoins based on demand.

It is true that a two-way peg from Bitcoin to a side-chain would necessarily involve hard forking Bitcoin, right? You'd have to somehow signal to the Bitcoin blockchain that the "Bitcoin" represented by the side-chain is returning to the original Bitcoin blockchain.

Is there some OPCODE that can be used on mainnet right now that facilitates two way pegging between Bitcoin and a side-chain?

[maaku]

No, it'd be a soft-fork change to bitcoin.

[freedomfighter]

why would they swap? they cant risk a loss

Atomic cross-chain swap has zero risk attached. Zero. It is 100% trustless.

The pegging mechanism merely provides a mechanism for market makers to adjust supply of sidecoins based on demand.

I must be missing something here.

In a previous post you wrote that :"we should expect a peg transaction to take at least 2-3 days to fully clear,[/font] depending on the final choice of parameters".

My previous post was based on this.

To me this means that if I am a vendor selling or buying a real asset for a sidecoin- or a future DAC performing a contractual obligation, that even if a commitment was made- that no transaction will be executed before the 2-3 days full clearance. if not than what is the significance of the 2-3 days? let it be something to disregard in the background. but in real world of contracts and assets this cant be disregarded.

1) am I missing the point here?

2) the same with converting sidecoins back to btc because I want fiat. can i sell my btc after swapping even without the 2-3 days full clearance period?

 

[maaku]

@freedomfighter,

This is getting into implementation details, so pay close attention to the parts which seem contradictory. Conceptually anyone who wants sidecoins and has bitcoins or vice versa can simply move value from one chain to the other, in essence destroying bitcoins and printing sidecoins albeit in a reversible process. However, this takes a considerable amount of time to clear -- about 3 days -- and blockchain space which requires fees. So in practice we fully expect that someone wanting to trade bitcoins for sidecoins will use a distributed marketplace and atomic cross-chain swaps in order to buy one coin with another, by finding a buyer at the other side. Use of the pegging mechanism will be limited to market makers who arbitrage when the price starts to deviate from the peg. Make sense?

[freedomfighter]

@freedomfighter,

This is getting into implementation details, so pay close attention to the parts which seem contradictory. Conceptually anyone who wants sidecoins and has bitcoins or vice versa can simply move value from one chain to the other, in essence destroying bitcoins and printing sidecoins albeit in a reversible process. However, this takes a considerable amount of time to clear -- about 3 days -- and blockchain space which requires fees. So in practice we fully expect that someone wanting to trade bitcoins for sidecoins will use a distributed marketplace and atomic cross-chain swaps in order to buy one coin with another, by finding a buyer at the other side. Use of the pegging mechanism will be limited to market makers who arbitrage when the price starts to deviate from the peg. Make sense?

Got it. thanks.

As far as this project coming via a "for profit" company, vs. a project like CP (the most BTC-like in spirit that I have seen since.... well..... BTC itself) which is fully decentralized A-Z. what is their business model here? unlike the cp initiators and investors that would like to earn in XCP, the sidechains fellows are shareholders. of what? what is the model and how can it NOT affect the decentralized nature of such a venture? (I read and appreciated your personal commitment to this attribute and independence).

 
 

[PodBayDoors]

2-way pegging means that value may be transferred at a pegged (fixed) rate in either direction.
<snip>

This special form output is a script which is able to understand an embedded proof-of-spend from another chain, which validates the accounting rules (you need to spend X bitcoins to claim X sidecoins, and vice versa), and which makes sure that claimed coins go to the indicated recipient.

<snip>

this question related to the red-marked quote:

What happens if I moved a BTC to a side chain to be used with a financial instruments such as options or even betting and GAINED an equivalent value to what I moved out. I now have 2 sidecoins but previously moved only 1BTC. can I go 1-way with one of them?

Yes, because the 1BTC that you gained through trading had to be originally moved into the sidechain as well, and it can be redeemed in the same way.

Where did this gain, this additional sidecoin, come from?

Who knows?  Trading?  Betting?  SatoshiSidecoinDice?  Either way, that coin didn't come from nowhere.  It came from someone who moved it into the sidechain from the mainchain.

So is it the case that at any time, anyone can move any amount of BTC that they control into any sidechain?
EDIT: What I am getting at is whether there are limits to the number of units on a particular sidechain. One does not need to find a "seller" or "redeemer" of sidecoins to make a BTC-sidecoin trade, since the sidecoin is not truly a separate unit of currency, so one is not really trading into it, correct?

(Thank you all for your patience and generosity in responding to my questions. I assume others trying to learn, too. I'm trying to piece things together from here and the two reddit threads.)

This is the critical question I'm still confused about. If 1 sidechain BTC always = 1 mainnet BTC, then how will sidechains be useful for assets? They'll be fine for things like fast BTC transactions etc.
Example: my sidechain asset (gold or whatever) that I paid for with 1 sidechainBTC is now worth 2 sidechainBTC. Do I redeem it for 2 sidechainBTC, then re-peg back to mainnet BTC?

[kdrop22]

Counterparty mentioned in this paper.
(It is further down you would have to search for 'counterparty' to view it).
http://www.ofnumbers.com/wp-content/uploads/2014/04/Bitcoins-Public-Goods-hurdles.pdf

[baddw]

2-way pegging means that value may be transferred at a pegged (fixed) rate in either direction.
<snip>

This special form output is a script which is able to understand an embedded proof-of-spend from another chain, which validates the accounting rules (you need to spend X bitcoins to claim X sidecoins, and vice versa), and which makes sure that claimed coins go to the indicated recipient.

<snip>

this question related to the red-marked quote:

What happens if I moved a BTC to a side chain to be used with a financial instruments such as options or even betting and GAINED an equivalent value to what I moved out. I now have 2 sidecoins but previously moved only 1BTC. can I go 1-way with one of them?

Yes, because the 1BTC that you gained through trading had to be originally moved into the sidechain as well, and it can be redeemed in the same way.

Where did this gain, this additional sidecoin, come from?

Who knows?  Trading?  Betting?  SatoshiSidecoinDice?  Either way, that coin didn't come from nowhere.  It came from someone who moved it into the sidechain from the mainchain.

So is it the case that at any time, anyone can move any amount of BTC that they control into any sidechain?
EDIT: What I am getting at is whether there are limits to the number of units on a particular sidechain. One does not need to find a "seller" or "redeemer" of sidecoins to make a BTC-sidecoin trade, since the sidecoin is not truly a separate unit of currency, so one is not really trading into it, correct?

(Thank you all for your patience and generosity in responding to my questions. I assume others trying to learn, too. I'm trying to piece things together from here and the two reddit threads.)

This is the critical question I'm still confused about. If 1 sidechain BTC always = 1 mainnet BTC, then how will sidechains be useful for assets? They'll be fine for things like fast BTC transactions etc.
Example: my sidechain asset (gold or whatever) that I paid for with 1 sidechainBTC is now worth 2 sidechainBTC. Do I redeem it for 2 sidechainBTC, then re-peg back to mainnet BTC?

Yes.

My understanding of at least part of the proposal is that the side-chain will allow Bitcoin devs to introduce new/experimental features, such as Counterparty-like features, without disturbing the mainnet or requiring multiple hard-forks/upgrades of Bitcoin.  Over time, once the new/experimental sidechains become fully vetted, it may happen that the sidechain becomes the mainchain.  In this way, a "Bitcoin 2.0" could be introduced gradually.

The asset-issuance questions apply equally to Counterparty, Mastercoin, Colored Coins, etc.  A certain amount of sidechain-BTC will be required in order to create an asset.  This asset may be traded for BTC just as Counterparty-assets (which, remember, are traded using BTC as the carrier, so they are actually BTC-assets in some way) may be traded for Counterparty-as-currency or BTC-as-currency.

You will never need to "re-peg".  The peg simply is.  It's built into both the sidechain-BTC and mainnet-BTC.  If you have 1 sidechain BTC, it will always be redeemable for 1 mainnet BTC directly through the transfer process.  If you have 1 mainnet BTC, it will always be redeemable for 1 sidechain BTC in the same way.  This is simply how the system will be built, and it cannot be changed.  If somebody did try to change it, their transaction would not be recognized by the honest nodes in the Bitcoin system. 

Perhaps the word "peg" is wrong, but I don't know a better word that communicates the idea.  Simply "equivalent"?  It is not a "peg" like with fiat currencies where one currency is manipulated to always match another.  It is the same currency.  It is like if you have 1 USD as a dollar bill, and you deposit it into your bank account.  Then you no longer have a dollar bill, but you have 1 USD in your bank account.  This can be changed back into a dollar bill by going to your bank and withdrawing it.  You can trade back and forth infinitely PaperUSD <==> BankUSD, and the bank is never going to try to give you more or less than 1 BankUSD for 1 PaperUSD.

[Anotheranonlol]

Counterparty mentioned in this paper.
(It is further down you would have to search for 'counterparty' to view it).
http://www.ofnumbers.com/wp-content/uploads/2014/04/Bitcoins-Public-Goods-hurdles.pdf

Also mentioned in this fantastic eBook, by same author: http://www.amazon.com/Great-Chain-Numbers-Contracts-Management-ebook/dp/B00IRUBMXO/

[miscreanity]

Perhaps the word "peg" is wrong, but I don't know a better word that communicates the idea.  Simply "equivalent"?  It is not a "peg" like with fiat currencies where one currency is manipulated to always match another.  It is the same currency.  It is like if you have 1 USD as a dollar bill, and you deposit it into your bank account.  Then you no longer have a dollar bill, but you have 1 USD in your bank account.  This can be changed back into a dollar bill by going to your bank and withdrawing it.  You can trade back and forth infinitely PaperUSD <==> BankUSD, and the bank is never going to try to give you more or less than 1 BankUSD for 1 PaperUSD.

I'm looking at side-chains as encapsulating cocoons or pods rather than pegs, since it seems that the value contained in each does have the potential of varying.

1 BTC -> PodA (1.0)

PodA has been instantiated with 1 BTC and is valued as such (this is similar to Proof-of-Burn so long as PodA exists). Now assume that demand for PodA increases by 50% which would value PodA at 1.5 BTC. This would mean that an additional 0.5 BTC is transferred to the PodA side-chain.

0.5 BTC -> PodA (1.5)

It's dependent upon simple demand (inflow) and supply (outflow). What's tricky is that this is all instantiated within a static parent supply (Bitcoin's 21mm divisible units).

The key to this working is the atomicity maaku mentions, otherwise the transactional barrier is no different from the Btcpay method in Counterparty.

[baddw]

Perhaps the word "peg" is wrong, but I don't know a better word that communicates the idea.  Simply "equivalent"?  It is not a "peg" like with fiat currencies where one currency is manipulated to always match another.  It is the same currency.  It is like if you have 1 USD as a dollar bill, and you deposit it into your bank account.  Then you no longer have a dollar bill, but you have 1 USD in your bank account.  This can be changed back into a dollar bill by going to your bank and withdrawing it.  You can trade back and forth infinitely PaperUSD <==> BankUSD, and the bank is never going to try to give you more or less than 1 BankUSD for 1 PaperUSD.

I'm looking at side-chains as encapsulating cocoons or pods rather than pegs, since it seems that the value contained in each does have the potential of varying.

1 BTC -> PodA (1.0)

PodA has been instantiated with 1 BTC and is valued as such (this is similar to Proof-of-Burn so long as PodA exists). Now assume that demand for PodA increases by 50% which would value PodA at 1.5 BTC. This would mean that an additional 0.5 BTC is transferred to the PodA side-chain.

0.5 BTC -> PodA (1.5)

It's dependent upon simple demand (inflow) and supply (outflow). What's tricky is that this is all instantiated within a static parent supply (Bitcoin's 21mm divisible units).

The key to this working is the atomicity maaku mentions, otherwise the transactional barrier is no different from the Btcpay method in Counterparty.

1.0 BTC in PodA will always be valued at 1.0 BTC in mainchain.  Why would you pay 1.5BTC for something that you can get for 1.0BTC?

You seem to be taking a "market cap" view with the Pod discussion.  The difference is in the assets, and the asset issuance model.  Assuming that assets may be issued within the sidechain, the "value" of any asset within the sidechain (and thus the sidechain as an aggregate) need not be related to the size of the BTC-currency used to create it. 

Somebody could create assets in a sidechain that represent hundreds of millions of dollars worth of real estate, primed with 1BTC.  The lots of land are transacted by a colored coins method: each lot is denoted by 1 Satoshi (but it is obviously valued much higher).  Any BTC coming into this sidechain would presumably solely be used for the purchase of such lots.

So take RealEstatePod primed with 1 BTC, each lot of land = 1 Satoshi.  Total BTC in this Pod is 1 BTC.  (But "value" is many millions of $$$.)  Now Buyer wants to purchase a lot, and transfers 100 BTC from mainchain into RealEstatePod for purchase of 1 lot.  100 BTC changes hands from buyer to seller.  1 Satoshi changes hands from seller to buyer to denote ownership of land.  Pod now contains 101 BTC.  Seller withdraws 100 BTC to mainchain to cash out.  Pod now contains 1 BTC.

The value of the assets denoted within the RealEstatePod did not go up or down when the 100 BTC were transferred in and out.  The value of 1.0 BTC stays the same across both chains.  It is only the specially denoted Satoshis (or whatever other increment the asset issuer chooses) that hold a different value.

Theoretically, the dollar-value of any one sidechain could exceed the dollar-value of all bitcoins in existence.  There's no theoretical problem with this.

[wizzardTim]

so should I use counterwallet now or bter?? What do you guys use?

[stereotype]

so should I use counterwallet now or bter?? What do you guys use?

Simple send and receive seems to work fine.
Asset buying and selling on the other hand, is a minefield, and is going to need re-thinking/working, if its to be adopted in a meaningful way, IMO.

[PhantomPhreak]

so should I use counterwallet now or bter?? What do you guys use?

Simple send and receive seems to work fine.
Asset buying and selling on the other hand, is a minefield, and is going to need re-thinking/working, if its to be adopted in a meaningful way, IMO.

I think that asset buying and selling is Counterparty just needs tweaking, and then only when it involves BTC. The fee system, in particular, makes the process of placing orders to buy/sell BTC unintuitive, but that can be handled completely by a polished UI.

[stereotype]

so should I use counterwallet now or bter?? What do you guys use?

Simple send and receive seems to work fine.
Asset buying and selling on the other hand, is a minefield, and is going to need re-thinking/working, if its to be adopted in a meaningful way, IMO.

I think that asset buying and selling is Counterparty just needs tweaking, and then only when it involves BTC. The fee system, in particular, makes the process of placing orders to buy/sell BTC unintuitive, but that can be handled completely by a polished UI.

Ok. Look forward to a streamlined GUI, but be sure it doesn't leave non-geeks baffled enough to not go back and try again, like i suspect, have done.
It really needs to be explained more, what the different hops mean to the user, together with their consequences, and why theres so much 'limbo' time. People really dont like being in limbo when they dont understand why, and they cant do anything to change it.   

[infra172]

Why will it take 3 days to clear?

First, a significant amount of work needs to be built on the “burn” transaction before it is used to claim the coins on the other chain, for the simple reason of avoiding DoS attacks. Then there is a length of time called the quieting period during which the return transaction and associated proofs are published, but not finalized, and anyone else can step forward with a reorg proof and rollback the transaction. Finally, there is a period of time afterwards analogous to the coinbase maturity where the coins are not spendable because a reorg could undo the peg transaction.

So that's three different waiting periods, each of which would probably be in the range of 100 - 144 blocks, if not more. The exact parameters are not set in stone at this moment, but with that in mind we should expect a peg transaction to take at least 2-3 days to fully clear, depending on the final choice of parameters.

Thank you for the correct XCP analysis gives us the miners reference
Thank you very much

[bitcoinrocks]

What's happening with the XCP price?  Are people worried about sidechains?  I noticed XCP and MSC prices have been moving in sync lately, but XCP is way down in comparison over the last 24 hours:

http://coinmarketcap.com/xcp_7.html
http://coinmarketcap.com/msc_7.html

Anyone know what that's about?

[wizzardTim]

so should I use counterwallet now or bter?? What do you guys use?

Simple send and receive seems to work fine.
Asset buying and selling on the other hand, is a minefield, and is going to need re-thinking/working, if its to be adopted in a meaningful way, IMO.

Send and receive works for XCP or for BTC too ?