Spin-offs: bootstrap an altcoin with a btc-blockchain-based initial distribution

[cypherdoc]

my ongoing discussion with Greg Maxwell on Reddit:

Greg:  All that is particular premine proposal that rewards existing Bitcoin holders. It doesn't really address any of the things sidechains are hoped to be useful for, in particular it can only produce competing systems which will then have to fight over the little network effect we have. It's also still a get rich scheme for the creators of the altcoin (but instead they hope to buy up coins from people who don't care for nearly nothing, and then pump the heck out of the coin).

cypherdoc:

i disagree.

its helpful to picture both Sidechains and Spin offs (altclones) as a series of parallel chains running vertically (or horizontally if you prefer) centered on the Bitcoin blockchain. instead of the on/off ramps connecting the chains being technically based, as you are proposing, the on/off ramps are economic in altclones. this lets the free market link the chains seamlessly thru exchanges presumably. note that these exchanges don't have to deal with fiat or the regulations that go with that. the important thing is that these altclones are not connected technically to the Bitcoin protocol with all the risks that go along with that. look what havoc a minor change like the 0.7 to 0.8 caused via the block fork last year. you seem to trivialize the description of sidechains down to just a couple minor code changes in scrypt but fail to account for the numerous economic chain reactions that result from that. i'm not a coder, nor an expert in cryptography, but from what i've read so far from you, your proposal seems much more technically complex than i think you're letting on. i see that as a major risk for Bitcoin. at least with altclones, the protocol is totally walled off and has no risk. BTC stay in the Bitcoin network where they belong. an altclone reduces the altcoin down to a simple evaluation of it's merits as an innovation and will make that judgment from an economic standpoint, not risking a technical failure of the whole system that could occur from your proposal.

i also see no economic motivation for a dev to create a sidechain, unlike with an altclone.

the important thing to remember about altclones is that their birth will distribute the altcoins amongst existing Bitcoin holders which gives the altclone an immediate user network effect and allow Bitcoiners to welcome and assess the altclone on its merits as opposed to a threat. b/c of all the scamcoins that have arisen, we have entered a zero sum game situation where the scamcoins have been siphoning off much needed capital from Bitcoin. both proposals will eliminate that i think we agree.

altclones are not a guaranteed get rich scheme as you are describing b/c the dev has much more to consider now and will be forced to introduce an altcoin based on merits only since he cannot immediately profit from an individual premine or IPO only then to dump. b/c he has the most "insider knowledge" of his altcoin's merit, he can be rewarded by scooping up any coins dumped by naysayers from the skeptical Bitcoiners who dump their free coins once the free market for trading opens. even then he can't dump b/c the opening prices for these coins will probably be in the pennies. he'll have to keep working at the code and improvements to make his fortune grow. this is a reasonable economic risk that a dev should have to make.

[Peter R]

...

Cyperdoc, I am very impressed.  You've already got two more influential people (Adam Back and Greg Maxwell) to consider the idea of spin-offs.

The question we need more consensus on is how will community behaviour change based on the new economic incentives from spin-offs?  I personally expect spin-offs to shift wealth in aggregate from alt-coins into the blockchain, not to siphon wealth from bitcoin to the spin-off.  I don't really see how the later is possible.

Like you said, it takes a hammer to alts that represent no useful innovation. 

[cypherdoc]

...

Cyperdoc, I am very impressed.  You've already got two more influential people (Adam Back and Greg Maxwell) to consider the idea of spin-offs.

The question we need more consensus on is how will community behaviour change based on the new economic incentives from spin-offs?  I personally expect spin-offs to shift wealth in aggregate from alt-coins into the blockchain, not to siphon wealth from bitcoin to the spin-off.  I don't really see how the later is possible.

Like you said, it takes a hammer to alts that represent no useful innovation.  

Sidechains have this Tron-Like Effect on people.  they envision a fast paced system where bitcoins are zooming back and forth btwn sidechains at free will and with no consequences.  they forget that some of those riders went over the edge or the freeway they were riding on self destructed.  they fail to recognize that bitcoins were designed to work within the Bitcoin Network and time has proven that to be successful.  thru a technical attack on a sidechain, any bitcoins caught on that sidechain will be lost according to Adam.  plus, their function in that sidechain network won't "fit" in the same way that they do in the Bitcoin network, imo.  there will be bitcoins lost in any sidechain that fails.  is that acceptable?  what feedback implications will that have on Bitcoin?  what effects will changing the scrypt coding have?

does this seem simple to you?:

Greg:

A good chunk of it is up to the sidechain, so I don't think there is a single crisp answer.

I'm going to be terribly unfair here: I say unfair because it may look like I'm giving you a wall of complex, ill defined arguments, and suggesting you need to defeat each one. The fact of the matter is that there cannot be a single security story for all sidechains and thinking in this space is still developing. So I'm going to summarize the tools I've been thinking about to boost sidechain security beyond SPV levels. Some of them may be bad, and I'm not suggesting you should need to defeat all of them— I'm basically listing them to convince you that there is a lot of space here to build security better than "not being dicks", though perhaps not ideal for all applications.

But before I do, I want to suggest two thoughts:

The first— How sure are we that in the long run Bitcoin security is any better? We know that today vast majority of miners (people with hashing hardware) do not validate anything, we know that the vast majority of merchants do not validate anything, we know that the majority of end users do not validate anything. Yet validation is stupidly cheap today, and so what happens if its necessary to uncap the blocksizes and validation becomes expensive? Validation has basically perfect centralization gains (validate once instead of N times). What happens as the subsidy fades to nothing?

The second thought— What security is actually required? There are many applications for Bitcoin, they don't all have the same security requirements. There are people doing low value unconfirmed transactions today. They already can be pretty easily ripped off with the help of miners— can't some of these transactions move to a solution with reduced security even if no methods are deployed to increase security?

One of my goals for sidechains is that they may act as a pressure relief value so that floods of very low value (and low security requirement) transactions do not necessarily force all of Bitcoin security to the low level justified by these transactions.

Now on to increasing sidechain security beyond the SPV-ish level that you get from the basic sidechain idea, for each one I'll list the tool and what I consider to be it's main weakness:

(0) If a sidechain is universally used, then miners could enforce its correctness as a soft-forking change to Bitcoin (e.g. reject blocks that contain an invalid sidechain proof), and validators could adopt it too. At that point the security story is the same as Bitcoin's. This is weak in that it removes the loose coupling and freedom for full nodes to not validate a sidechain they don't care about. But it seems strictly better than just making the soft forking change in Bitcoin directly, since you're not forced to do so before anyone is even using it yet.

(1) My CoinWittness
 
post describes using ZK-SNARKS to construct compact proofs of correctness that could be used to convince people a sidechain spend is valid. This is weak in that it really cutting edge cryptography and the prover part takes a lot of resources but the verifier is trivial and if its used its purely additive in security.

(1a) It's possible to efficient proofs of valid execution in an interactive challenger model without invoking any novel crypto at all
 
. Basically the sidechain proof generator encodes a transcript of his verification process and commits to it. Then if his verification was wrong, a challenger shows up with a different commitment, and there is a log() communications process to decide which of the competing claims are valid. Because this is interactive, however, this is weak because if >50% of the Bitcoin hashpower blocks it they can hide the fraud proofs. It's also weak in that while the fraud proofs are log2() they can get somewhat large and the sidechain must implement its validation in a transcript producing model.

(2) The definition of the sidechain can specify a federation of parties that must threshold sign blocks (including, perhaps, updates to the federation list). This is weak because it creates a (distributed) point of centralization around the federation.

(2a) The definition of the sidechain can require that the spends are signed by systems running the verification code on remote-attest hardware (like arm trustzone). Then anyone can spin up a verifier and the security is tractable to the integrity of the remote attest and intel/amd/etc keys. This is weak in that no one has great confidence in the strength of remote attest . Though if it can be combined with (2) for purely additive security.

(3) Proof of Stake-ish federation: Have utxo in the sidechain provide public keys which are used to build threshold signatures that must sign the proofs. This is nice in that in the few-users case it degrades to perfect security, but at large sizes it may be hard to make both efficient and reliable.

(4) Econonmic incentives for honest mining can be created by techniques like bonding the creation or having some fee deferral tokens. Adam has thought more about ideas in this space than me. I generally think the economic incentive approaches are tricky to reason about.

I don't think this list is exhaustive, but it's some things I've been thinking about in terms of trying to making the design on the bitcoin side generic enough that sidechains are free to innovate in their security story too. Sidechains could implement zero or more of these approaches and potentially even change them through there life— e.g. boostraping in a federated-signing model but with a pre-programmed transition to more decenteralized security if/once that sidechain has grown enough.

[cypherdoc]

Sidechains will require hard coded changes to the Bitcoin protocol, not just scrypt.

[smooth]

thru a technical attack on a sidechain, any bitcoins caught on that sidechain will be lost according to Adam.

That sounds great to me. My bitcoins become more valuable.

[cypherdoc]

thru a technical attack on a sidechain, any bitcoins caught on that sidechain will be lost according to Adam.

That sounds great to me. My bitcoins become more valuable.

yeah, i thought about that too.

but i know you're smart enough to know there could be other unpredictable knock on effects such as loss in confidence in the system not to mention feedback technical effects unforeseen.

[smooth]

thru a technical attack on a sidechain, any bitcoins caught on that sidechain will be lost according to Adam.

That sounds great to me. My bitcoins become more valuable.

yeah, i thought about that too.

but i know you're smart enough to know there could be other unpredictable knock on effects such as loss in confidence in the system not to mention feedback technical effects unforeseen.

I worry more about the changes needed to bitcoin to support side chains than whatever it is that side chains do. They don't seem trivial enough for everyone to have high confidence in the firewall. I'm not sure they will ever get adopted for that reason, or that if they do it won't have negative affects on bitcoin deriving from the loss of confidence in the security.

But assuming the changes do get adopted and assuming the firewall is actually secure, then I still agree with you there could be less obvious knock-on effects. Then again, those could be positive. That's a big part of the intent of the proposal after all.

[cypherdoc]

thru a technical attack on a sidechain, any bitcoins caught on that sidechain will be lost according to Adam.

That sounds great to me. My bitcoins become more valuable.

yeah, i thought about that too.

but i know you're smart enough to know there could be other unpredictable knock on effects such as loss in confidence in the system not to mention feedback technical effects unforeseen.

I worry more about the changes needed to bitcoin to support side chains than whatever it is that side chains do. They don't seem trivial enough for everyone to have high confidence in the firewall. I'm not sure they will ever get adopted for that reason, or that if they do it won't have negative affects on bitcoin deriving from the loss of confidence in the security.

But assuming the changes do get adopted and assuming the firewall is actually secure, then I still agree with you there could be less obvious knock-on effects. Then again, those could be positive. That's a big part of the intent of the proposal after all.

agreed.

and let us not forget that Adam's company is for-profit.  it's unacceptable to let a for-profit company come into Bitcoin and make hard coded changes to the protocol.  i don't care how well intentioned he may be, profits need to be made.  he's self admitted he missed the Bitcoin wave up.  is this his way of compensating?  i give due respect to his hashcash POW concept but that shouldn't blind us.

also, gmax is on record as being a long term Bitcoin skeptic.  in my debates with him i've found his views on politics, social interactions, and economics highly suspect.  Andreas and I had a terrible time with him back when he lead the charge to unilaterally ban Matonis and Ver from the Bitcoin.org Press Center.  that was a huge battle in the community.  we eventually won but he's been on my suspect list ever since.

as a result i find it interesting he is spearheading this idea as he feels it can "fix Bitcoin".

[Peter R]

Many people erroneously think the value of bitcoin comes primarily from its "features."  In my opinion, a large part of its value comes from the fact that it has been endlessly beaten-up since 2009 and remained resilient--bitcoin has in fact grown by leaps and bounds in spite the world's efforts to thwart it.

Side-chains are technically brilliant.  If there was a way to implement them without any changes to bitcoin they would have my support.  My concern is that the desire to facilitate experimentation of features with questionable utility may not outweigh the very real technical risk of implementing them and the potential loss of confidence that may result.  I will be able to make up my mind more definitively after I have studied the to-be-released side-chain white-paper.  

That being said, I think things will unfold exactly as they need to.  Spin-offs can become a reality very soon, where side-chains will take longer.  But the new awareness that both are possible helps take a hammer to pump-and-dump alt-coin schemes.  By the time side-chains ever have a chance to become reality, the perception that they are needed may have already waned.  

[cypherdoc]

Many people erroneously think the value of bitcoin comes primarily from its "features."  In my opinion, a large part of its value comes from the fact that it has been endlessly beaten-up since 2009 and remained resilient--bitcoin has in fact grown by leaps and bounds in spite the world's efforts to thwart it.

Side-chains are technically brilliant.  If there was a way to implement them without any changes to bitcoin they would have my support.  My concern is that the desire to facilitate experimentation of features with questionable utility may not outweigh the very real technical risk of implementing them and the potential loss of confidence that may result.  I will be able to make up my mind more definitively after I have studied the to-be-released side-chain white-paper.  

That being said, I think things will unfold exactly as they need to.  Spin-offs can become a reality very soon, where side-chains will take longer.  But the new awareness that both are possible helps take a hammer to pump-and-dump alt-coin schemes.  By the time side-chains ever have a chance to become reality, the perception that they are needed may have already waned.  

with that said, how are you planning on leading the charge on this?  i certainly am no coder.

[Peter R]

I just sent you a PM.  Let me know what you think.  

[Adrian-x]

Are there any developers thinking of spinning - off there existing code to include Bitcoin distribution?
if not what are your concerns?

[throwaway]

Side-chains are technically brilliant.  If there was a way to implement them without any changes to bitcoin

You could make a Bitcoin spin-off, and grow the sidechains off the spin-off instead of growing them off the original Bitcoin.

[smooth]

Side-chains are technically brilliant.  If there was a way to implement them without any changes to bitcoin

You could make a Bitcoin spin-off, and grow the sidechains off the spin-off instead of growing them off the original Bitcoin.

+1

This has been proposed before as a way to do any kind of bitcoin 2.0. Split and let the market decide which chain to support.

[Adrian-x]

Side-chains are technically brilliant.  If there was a way to implement them without any changes to bitcoin

You could make a Bitcoin spin-off, and grow the sidechains off the spin-off instead of growing them off the original Bitcoin.

+1

This has been proposed before as a way to do any kind of bitcoin 2.0. Split and let the market decide which chain to support.

So many options now we just hope that wisdom and technical skill manifest in the same people. 

[Mautje]

So you have to supply your BTC privkeys in order to get the new coins? Doesn't anyone else see a security problem with this?

[smooth]

So you have to supply your BTC privkeys in order to get the new coins?

No.

[Mautje]

So you have to supply your BTC privkeys in order to get the new coins?

No.

you can freely claim your share of æther by signing an æthereum address with your bitcoin private keys.

I'm probably mis-interpreting this..

[smooth]

So you have to supply your BTC privkeys in order to get the new coins?

No.

you can freely claim your share of æther by signing an æthereum address with your bitcoin private keys.

I'm probably mis-interpreting this..

You do the signing yourself. You don't have to give your private key to anyone.

[m7ammad]

Spin-offs: bootstrap your alt-coin with a bitcoin-blockchain-based initial coin distribution

This method (a) bootstraps alt-coins with a very large potential user base, (b) places all alt-coins on equal footings thereby allowing them to compete on their own merits, (c) automatically piggybacks bitcoin investors in any financial gains that may result due to community innovation, (d) fairly rewards innovative alt-coin developers as they can scoop up spin-offs dumped cheaply on the open market, (e) makes it difficult to “pump and dump.”

You yourself said it. The market will redistribute aether to those who see value in it. so it will have to go through the same growing pains of any other coin, only with a magnified effect, because by the time people figure out that the aether they can claim has value without understanding it's potential, they will start dumping. so every boom will be followed by a super dump by people who hold something they don't value. This will go on for quite a few price jumps as every time, more and people people realize that they can claim aether. You can't assume that just because you give someone something, she/he will value it