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Author Topic: Gold collapsing. Bitcoin UP.  (Read 1805721 times)
thezerg
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October 23, 2014, 10:21:19 PM
 #14361

That's right.  To state it clearly, there will be an arbitrage opportunity.  Buy BTC, transfer into SC, sell SCBTC, buy BTC.  So the price of bitcoin will be lifted with the added value sidechains bring.  In this sense inca, the child chain can never "destroy" Bitcoin even if it ends up carrying 99.9% of the transactions.

Markets and their capitalizations are a funny thing. They are illusory. We talk about bitcoin's current cap as being the price of a single coin multiplied by all the coins in existence. But the reality is far from that as the price is manipulated from, say, 1166 to 350 by a fraction of a few % of the coins in existence, or relatively modest amounts of fiat currency (millions to tens of millions of dollars only) on the way up.

This concept of a 'two way peg' between bitcoin blockchain and side chain is really an exchange. The terms of how many SCBTC can be acquired/released by locking/unlocking actual BTC are flexible and could float, for example based upon fiat exchange value of SCBTC or BTC. If SCBTC use becomes prevalent then it is possible that as the value of BTC falls, SCBTC rises, until BTC is not a store of value.

What you say (emboldened) is probably accurate. But what we care about is bitcoin maintaining value, as it's algorithmic scarcity was designed to do. That is the reason we hold it!

I'm sure 99% SCs will use 1:1 conversion rate and no new SCBTC will be generated ... you will still have your bitcoins, but few will be locked in "fast transfer" sidechain  ... you will have some locked in "exchage" sidechain ... and some in your private business sidechains (not public sidechains)

Yes, the conversion ratio AFAIK has to be algorithmically defined.  So even if its not 1:1 that fact is irrelevant.   If its 1:10 then its 10:1 to go back.  

Inca, the number of BTC that are put on the sidechain is irrelevant.  As long as there is a single Satoshi left "unlocked" on the bitcoin chain, that satoshi can be transferred into the sidechain for SCBTC.  So that Satoshi is worth its value in SCBTC.  As long as SCBTC has value, BTC would be a store of that value.

You're practically arguing against yourself here.  If some awesomely functional chain existed that had the potential to destroy bitcoin's value, would you prefer it to be an altcoin where none of your BTC transfers or would you prefer that it be a sidechain?  If the functionality was really that compelling you can be sure that it would eventually out-compete Bitcoin -- it just may take a few years longer as an altcoin.
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October 23, 2014, 10:22:00 PM
 #14362

As scarcity increases, so does the price.... Mtgox was an exchange... that has nothing to do with a protocol and its security. You should rethink a bit of what you just said here.

I agree scarcity drives price when demand exists. It is why I speculatively hold bitcoin right now. What will drive the demand for bitcoin if everyone moves to a bitcoin 2.0 chain?

We arent talking about 2.0 chains (like ethereum) we are talking about sidechains. They exist on the bitcoin blockchain.

Bro, do you even blockchain?
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October 23, 2014, 10:27:10 PM
 #14363

how can you assure that they won't?  simply b/c they haven't?  that's naive.

Because it's open source

Counterfeit:  made in imitation of something else with intent to deceive:  merriam-webster
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October 23, 2014, 10:28:24 PM
 #14364

i'm missing something here.

why can't the scBTC develop an independent value in USD on their own on an exchange?  and if that value starts going up relative to the BTC value b/c the SC turns out to be better functionally, then why wouldn't every BTC owner be forced to transfer their BTC over to scBTC along with a migration of direct mining hashpower to the SC?  if the SC is better, the difference in value btwn BTC and scBTC can't be arbitraged away.

the end result being a destroyed Bitcoin and a "new" Sidechain dominance.
thezerg
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October 23, 2014, 10:28:52 PM
 #14365

I'm sure 99% SCs will use 1:1 conversion rate and no new SCBTC will be generated ... you will still have your bitcoins, but few will be locked in "fast transfer" sidechain  ... you will have some locked in "exchage" sidechain ... and some in your private business sidechains (not public sidechains)

We can give ourselves 50% of the ether initially and let the next 50% come from locked coins. A pre side mine if you like. As soon as a decent number of coins are locked into our chain we can just cash out.

You certainly could.  You could unlock (get on the bitcoin chain) exactly as many BTC as were locked regardless of how many ether you created.  So you could leave a bunch of bagholders on the sidechain.

How is this any different from Mt Gox, Moolah, altcoin pump and dump, etc?

Sidechains don't magically make people honest.


But one additional point: the "bagholders" on the sidechain now have coins whose value would float relative to bitcoin (there is no backing BTC).  So what they are left with is better than Gox or Moolah -- they are left with a functioning altcoin that presumably has some utility to them or they would never have moved BTC there in the first place.  A similar result could happen if someone 51%ed the chain and unlocked the backing BTC.
thezerg
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October 23, 2014, 10:32:04 PM
 #14366

i'm missing something here.

why can't the scBTC develop an independent value in USD on their own on an exchange?  and if that value starts going up relative to the BTC value b/c the SC turns out to be better functionally, then why wouldn't every BTC owner be forced to transfer their BTC over to scBTC along with a migration of direct mining hashpower to the SC?  if the SC is better, the difference in value btwn BTC and scBTC can't be arbitraged away.

the end result being a destroyed Bitcoin and a "new" Sidechain dominance.

Why "forced" to transfer?

Nobody is forced.  But if BTC owners could sell their BTC for $400 (say) and scBTC for $425, then arbitragers would naturally buy BTC, convert it to scBTC and sell it, making $25 (or the opposite).  So the price will never diverge significantly. 

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October 23, 2014, 10:34:39 PM
 #14367

i'm missing something here.

why can't the scBTC develop an independent value in USD on their own on an exchange?  and if that value starts going up relative to the BTC value b/c the SC turns out to be better functionally, then why wouldn't every BTC owner be forced to transfer their BTC over to scBTC along with a migration of direct mining hashpower to the SC?  if the SC is better, the difference in value btwn BTC and scBTC can't be arbitraged away.

the end result being a destroyed Bitcoin and a "new" Sidechain dominance.

Why "forced" to transfer?

Nobody is forced.  But if BTC owners could sell their BTC for $400 (say) and scBTC for $425, then arbitragers would naturally buy BTC, convert it to scBTC and sell it, making $25 (or the opposite).  So the price will never diverge significantly.  


There should always be an scBTC discount based upon the market-determined probability that the SC will crash and burn.

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October 23, 2014, 10:37:43 PM
 #14368

As scarcity increases, so does the price.... Mtgox was an exchange... that has nothing to do with a protocol and its security. You should rethink a bit of what you just said here.

I agree scarcity drives price when demand exists. It is why I speculatively hold bitcoin right now. What will drive the demand for bitcoin if everyone moves to a bitcoin 2.0 chain?

We arent talking about 2.0 chains (like ethereum) we are talking about sidechains. They exist on the bitcoin blockchain.

By 'bitcoin 2.0 chain' I simply mean't a sidechain which was superior to bitcoin.

This will be my last post tonight as I don't want to spam the thread. But my point was simply that if a bitcoin sidechain becomes popular, value may migrate from the bitcoin chain to side chain. If 'there can be only one' then a very significant number of coins on the bitcoin chain may become locked resulting in actual use of bitcoin being very limited, with global transactions occuring on the side chain instead.

I cannot see in that situation that simple scarcity alone will maintain a high price, simply because demand is clearly for the side chain usurper, not for bitcoin anymore.

Anyway, good night all. Thanks for the interesting thoughts guys.
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October 23, 2014, 10:38:16 PM
 #14369

i'm missing something here.

why can't the scBTC develop an independent value in USD on their own on an exchange?  and if that value starts going up relative to the BTC value b/c the SC turns out to be better functionally, then why wouldn't every BTC owner be forced to transfer their BTC over to scBTC along with a migration of direct mining hashpower to the SC?  if the SC is better, the difference in value btwn BTC and scBTC can't be arbitraged away.

the end result being a destroyed Bitcoin and a "new" Sidechain dominance.

Why "forced" to transfer?

Nobody is forced.  But if BTC owners could sell their BTC for $400 (say) and scBTC for $425, then arbitragers would naturally buy BTC, convert it to scBTC and sell it, making $25 (or the opposite).  So the price will never diverge significantly.  



forced b/c the SC has developed a better functionality that the market prefers.

the arbitrage works in theory except for this confirmation and contest period of waiting.  that delay of a day or 2 could have unpredictable effects on pricing.  maximal slippage.
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October 23, 2014, 10:40:56 PM
 #14370

Yes, the conversion ratio AFAIK has to be algorithmically defined.

"Algorithmically defined" doesn't really mean anything. The redemption price could be floating based on the BTC balance for the side chain (for example a minimum conversion price "algorithm" of 1/balance would ensure that the balance never ran out).

Side chains aren't really that different from a decentralized exchange (in fact the atomic swap concept is exactly cross chain trading) except that in the original conception the expectation is for a fixed 1:1 exchange rate. I don't see anything that requires that though.

I think it may well turn out that side chains are just a reinvention of altcoins.

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October 23, 2014, 10:46:18 PM
 #14371

i'm missing something here.

why can't the scBTC develop an independent value in USD on their own on an exchange?  and if that value starts going up relative to the BTC value b/c the SC turns out to be better functionally, then why wouldn't every BTC owner be forced to transfer their BTC over to scBTC along with a migration of direct mining hashpower to the SC?  if the SC is better, the difference in value btwn BTC and scBTC can't be arbitraged away.

the end result being a destroyed Bitcoin and a "new" Sidechain dominance.

Because there is a MATH no 3D party -> how to convert(lock) BTC to scBTC

Rule #1
You can anytime convert BTC to scBTC using this conversion function (if btc protocol is not broken)

repeat(
 1. Convert BTC -> scBTC
 2. You sell scBTC for $ 
 3. buy more BTC at Bitstamp
)

=> scBTC has only value of BTC  (SideChain has value based on BTC)

Rule #2
There is conversion function (MATH) how to convert scBTC to BTC (unlock your/anybody previously locked coins ... if SideChain is not broken => you cannot unlock more, than was locked)
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October 23, 2014, 10:50:43 PM
 #14372

i'm missing something here.

why can't the scBTC develop an independent value in USD on their own on an exchange?  and if that value starts going up relative to the BTC value b/c the SC turns out to be better functionally, then why wouldn't every BTC owner be forced to transfer their BTC over to scBTC along with a migration of direct mining hashpower to the SC?  if the SC is better, the difference in value btwn BTC and scBTC can't be arbitraged away.

the end result being a destroyed Bitcoin and a "new" Sidechain dominance.

Because there is a MATH no 3D party -> how to convert(lock) BTC to scBTC

Rule #1
You can anytime convert BTC to scBTC using this conversion function (if btc protocol is not broken)

repeat(
 1. Convert BTC -> scBTC
 2. You sell scBTC for $ 
 3. buy more BTC at Bitstamp
)

=> scBTC has only value of BTC  (SideChain has value based on BTC)

Rule #2
There is conversion function (MATH) how to convert scBTC to BTC (unlock your/anybody previously locked coins ... if SideChain is not broken => you cannot unlock more, than was locked)

Those rules provide a 1:1 peg. It remains to be seen whether such a peg will be economically viable. It appears (somewhat) to be technically viable to implement.

Those particular rules however, are not required by the side chain concept, as the side chain developers have stated on Reddit and elsehwere. Different rules are possible, which gives rise to all manner of altchains/altcoins.

I think the side chain developers are wasting their time pathologically obsessing over scamcoins, both because scamcoin market value is tiny and because "killing altcoins" or "protecting scarcity" isn't the real value of side chains anyway. The value of side chains is as a safer and faster mechanism for extending and improving (though also damaging I suppose) Bitcoin, if they work.



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October 23, 2014, 11:04:01 PM
 #14373

i'm missing something here.

why can't the scBTC develop an independent value in USD on their own on an exchange?  and if that value starts going up relative to the BTC value b/c the SC turns out to be better functionally, then why wouldn't every BTC owner be forced to transfer their BTC over to scBTC along with a migration of direct mining hashpower to the SC?  if the SC is better, the difference in value btwn BTC and scBTC can't be arbitraged away.

the end result being a destroyed Bitcoin and a "new" Sidechain dominance.

Because there is a MATH no 3D party -> how to convert(lock) BTC to scBTC

Rule #1
You can anytime convert BTC to scBTC using this conversion function (if btc protocol is not broken)

repeat(
 1. Convert BTC -> scBTC
 2. You sell scBTC for $ 
 3. buy more BTC at Bitstamp
)

=> scBTC has only value of BTC  (SideChain has value based on BTC)

Rule #2
There is conversion function (MATH) how to convert scBTC to BTC (unlock your/anybody previously locked coins ... if SideChain is not broken => you cannot unlock more, than was locked)

Those rules provide a 1:1 peg. It remains to be seen whether such a peg will be economically viable. It appears (somewhat) to be technically viable to implement.

Those particular rules however, are not required by the side chain concept, as the side chain developers have stated on Reddit and elsehwere. Different rules are possible, which gives rise to all manner of altchains/altcoins.

I think the side chain developers are wasting their time pathologically obsessing over scamcoins, both because scamcoin market value is tiny and because "killing altcoins" or "protecting scarcity" isn't the real value of side chains anyway. The value of side chains is as a safer and faster mechanism for extending and improving (though also damaging I suppose) Bitcoin, if they work.


A lot of functions are possible but only few are viable
-> I will not send bitcoin to sidechain if I'm not able to withdraw same amount.
-> I'll only send bitcoin to sidechain if I can get some advantage e.g.  fast transfer to buy coffe ( HOT wallet )
-> I can keep some coin in ExchangeSideChian to have advantage buy cheap coins -> then I'll store them to COLD BITCOIN wallet.

Advantage of SideChain is that I OWN PRIVATE KEYS +  sideChain offer me some advantage
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October 23, 2014, 11:05:21 PM
 #14374

i'm missing something here.

why can't the scBTC develop an independent value in USD on their own on an exchange?  and if that value starts going up relative to the BTC value b/c the SC turns out to be better functionally, then why wouldn't every BTC owner be forced to transfer their BTC over to scBTC along with a migration of direct mining hashpower to the SC?  if the SC is better, the difference in value btwn BTC and scBTC can't be arbitraged away.

the end result being a destroyed Bitcoin and a "new" Sidechain dominance.

Because there is a MATH no 3D party -> how to convert(lock) BTC to scBTC

Rule #1
You can anytime convert BTC to scBTC using this conversion function (if btc protocol is not broken)

repeat(
 1. Convert BTC -> scBTC
 2. You sell scBTC for $  
 3. buy more BTC at Bitstamp
)

=> scBTC has only value of BTC  (SideChain has value based on BTC)

this is where i still don't understand.  remember, i'm trying to think of a scenario where SC's can hurt Bitcoin.

presumably, both BTC and scBTC will be traded 24/7 on an exchange for USD.  if a scBTC begins to exceed the value of a BTC in USD terms b/c the market perceives the SC to have a superior feature of whatever, then BTC will start to migrate to the SC as scBTC.  why?  b/c they're worth MORE in USD terms.  at some point, you could even imagine where there could be a rush to make this conversion if the tech is that much better.  mining power would also migrate to the SC.  this cannot be arbed away b/c in this scenario, the SC is superior making the scBTC more valuable, no matter that a 1:1 peg exists.  this could get quite disorderly and ecoomically disadvantageous for BTC holders with this confirmation and contest period of 1-2 days. what am i missing?
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October 23, 2014, 11:13:30 PM
 #14375

there is the potential to implement things that will benefit the company.  why can't you see this?  we should avoid if at all possible compromising situations.  5 devs under one roof is not the answer, imo.  if they were split up individually, then fine.

there is potential they might try to. but anything that would be considered harmful to the main blockchain would be met with considerable opposition from other core devs, miners & nodes. the fact that they are 5 core devs does not give them vto over code implementation. if the community finds them to behave in an unethical way they will lose their place. simple as that.

how can you assure that they won't?  simply b/c they haven't?  that's naive.
Quote

Because they have no incentive to do so. End of the story. Care to share any incentive that would have them betray the trust of the community at large and potentially hurt Bitcoin? A pay raise? A patt in the back from CEO Austin Hill? Blockstreams success aligns with Bitcoin's success, not their sidechains.

the fact that Hill and Back did miss early adoption of Bitcoin needs to be considered.  they probably don't have much in the way of BTC.  this could change all that for them so i don't blame them for taking this shot if they can get ppl like you to buy in.
Quote

People like me ?  Roll Eyes

Are you suggesting they wish to implement sidechains so that they can scam people out of their BTC? Because that's surely what this sounds like. I'm quite sure even though they are not early adopters, they probably have enough BTC so that if it succeeds the way you & me hope they will be comfortable enough.

"I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash." Hal Finney, Dec. 2010
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October 23, 2014, 11:19:36 PM
 #14376


why don't you try giving me an answer to my post just above yours before i answer you?
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October 23, 2014, 11:21:34 PM
 #14377

-> I will not send bitcoin to sidechain if I'm not able to withdraw same amount.

Ah, but that is only true if you aren't speculating on getting more. If you can get more, then you will rationally risk getting less.

An example of a lottocoin was given on Reddit by one of the developers. Everyone can move to the side chain, but only one person (chosen randomly) gets to move all of the bitcoins back. Everyone else gets nothing.

How is it possibly not clear this creates even more opportunities for speculative markets?
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October 23, 2014, 11:28:22 PM
 #14378

i'm missing something here.

why can't the scBTC develop an independent value in USD on their own on an exchange?  and if that value starts going up relative to the BTC value b/c the SC turns out to be better functionally, then why wouldn't every BTC owner be forced to transfer their BTC over to scBTC along with a migration of direct mining hashpower to the SC?  if the SC is better, the difference in value btwn BTC and scBTC can't be arbitraged away.

the end result being a destroyed Bitcoin and a "new" Sidechain dominance.

Because there is a MATH no 3D party -> how to convert(lock) BTC to scBTC

Rule #1
You can anytime convert BTC to scBTC using this conversion function (if btc protocol is not broken)

repeat(
 1. Convert BTC -> scBTC
 2. You sell scBTC for $ 
 3. buy more BTC at Bitstamp
)

=> scBTC has only value of BTC  (SideChain has value based on BTC)

Rule #2
There is conversion function (MATH) how to convert scBTC to BTC (unlock your/anybody previously locked coins ... if SideChain is not broken => you cannot unlock more, than was locked)

Those rules provide a 1:1 peg. It remains to be seen whether such a peg will be economically viable. It appears (somewhat) to be technically viable to implement.

Those particular rules however, are not required by the side chain concept, as the side chain developers have stated on Reddit and elsehwere. Different rules are possible, which gives rise to all manner of altchains/altcoins.

I think the side chain developers are wasting their time pathologically obsessing over scamcoins, both because scamcoin market value is tiny and because "killing altcoins" or "protecting scarcity" isn't the real value of side chains anyway. The value of side chains is as a safer and faster mechanism for extending and improving (though also damaging I suppose) Bitcoin, if they work.


A lot of functions are possible but only few are viable
-> I will not send bitcoin to sidechain if I'm not able to withdraw same amount.

SC's will always be less secure.  you may not get them back if 51% attacked.
Quote
-> I'll only send bitcoin to sidechain if I can get some advantage e.g.  fast transfer to buy coffe ( HOT wallet )

how are you gonna do this with a 1-2 day confirmation/contest period
Quote
-> I can keep some coin in ExchangeSideChian to have advantage buy cheap coins -> then I'll store them to COLD BITCOIN wallet.

then you're speculating.  introduces risk.
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October 23, 2014, 11:29:59 PM
 #14379

Quote
-> I'll only send bitcoin to sidechain if I can get some advantage e.g.  fast transfer to buy coffe ( HOT wallet )

how are you gonna do this with a 1-2 day confirmation/contest period

You would do it in advance of course. Keeping a small amount of spending money on the fast chain for these sorts of purchases.
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October 23, 2014, 11:35:51 PM
 #14380

Quote
-> I'll only send bitcoin to sidechain if I can get some advantage e.g.  fast transfer to buy coffe ( HOT wallet )

how are you gonna do this with a 1-2 day confirmation/contest period

You would do it in advance of course. Keeping a small amount of spending money on the fast chain for these sorts of purchases.

ok, fair enough.  what if you need to move large #'s BTC from cold storage into scBTC quickly if it becomes clear the SC is going to dominate b/c of some innovative feature and the exchange price is fluctuating wildly in the meantime?
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