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Author Topic: Gold collapsing. Bitcoin UP.  (Read 2031526 times)
thezerg
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October 24, 2014, 01:29:26 AM
 #14381

ah, that does make sense actually.  but what happens if, as it becomes clear that a SC is going to win over Bitcoin, miners begin to jack their mining tx fees just b/c they can to create the SPV proof tx required to make the switch to scBTC?

Why don't miners jack txn fees today?  Its actually a small "issue" in the protocol.  Miners that search for a zero txn block have a tiny advantage.  But miners would not want to block movement from BTC to SCBTC.  It can only enhance the value of BTC since a BTC is convertible to an SCBTC at any time (and back).

Aside: This idea of a "rush" to scBTC does not make sense.  People "rush" to get a better deal.  But the deal will always be the same, so no need to rush.

also, there still is the question of Blockstream creating an additional asset on the winning SC ahead of time that stands to profit from a rush of BTC to scBTC.

But this "pre-mine" will be visible on the sidechain.  So I suppose if you want to move your BTC to a chain that is not fully backed that is your choice.  But no matter what happens you'll never be able to move more BTC back the the bitcoin blockchain than was put in because remember BTC is not actually "moved" it is "locked" on the bitcoin blockchain.


you still haven't answered how a SC can't hurt Bitcoin if the economic value of a scBTC starts exceeeding a BTC in USD terms b/c of a significant innovation.

It depends on what you mean by "hurt".  Remember Peter R and how he was saying that the true value of BTC is the memory -- the blockchain history.  And so he was threatening to fork any altcoin project and "pre-mine" it to exactly match the bitcoin blockchain.

Sidechains will preserve the bitcoin "memory" -- the value of the blockchain history.  This will happen because you can move value on a N for M (constant) basis from the bitcoin blockchain to the sidechain, so the value ON the bitcoin blockchain will always be relevant.  In contrast, a wildly successful altcoin (personally I don't think it'll happen, but if it could happen on a sidechain it could happen on an altcoin) would drain value from the bitcoin blockchain.

Yes, a wildly successful sidechain could "hurt" bitcoin in the sense that the # of transactions on the bitcoin ledger goes down (moved to the sidechain).  But I don't classify this as "hurt".  In fact, some would see this as an advantage.  Bitcoin could hold huge value denominations of coins (1 or 2 BTC :-)) more safely than the high transaction speed, application specific side-chains.  And note the bitcoin will be a popular mining destination for our lifetimes at least because of the block reward -- every BTC mined is exchangeable N for M with scBTC on the sidechain.
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October 24, 2014, 01:32:52 AM
 #14382

This is open source software. Even considering stealth development of a rogue sidechain, the moment they commit the code to a sidechain, the code is out there for everyone to see.

the SC doesn't have to be rogue.  it just has to be better.

once it's determined the SC is better, the scBTC become more valuable than BTC.  the arb can't work b/c the SC chain is superior and therefore the scBTC are worth more than the BTC. those who moved first will be in a better position. once other BTC holders detect this, they will start to migrate to scBTC.  but the catch is:  there's a cost to do so. mining fees.

once miners detect this migration they will raise their fees to extortionist levels. they have to b/c accepting a devaluing BTC is risky. 

the reason this is more dangerous than simple altcoins is that you're building a system where there is a temptation for miners to merge mine these SC's thus providing them with the security they need to get up and running.  we know from Peter Todd that Hill has been aggressively attempting to get mining pools to support SC's.
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October 24, 2014, 01:50:32 AM
 #14383

Two thoughts:

What would Satoshi think of sidechains?

(Hint: I suspect he likes them ... )

What if someone(s) involved with Blockstream is Satoshi?

Now it is all out in the open, like the source code, which for sidechains, does not even exist yet.

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October 24, 2014, 02:03:49 AM
 #14384

a) scBTC have less value than BTC

If you are talking about a 1:1 peg I don't see this, really. If it persists then people will just flee the SC and it will become irrelevant (absent some short term uses like paying for coffee perhaps).

If you are talking about a non-1:1 peg then it isn't clear to me that scBTC need necessarily be worth less than BTC. For example scBTC could pay dividends in some non-convertable asset.


scBTC has almost same value as BTC (but there is little more risk. BTC == scBTC + riskOfConversion )

No the correct equation is BTC == scBTC + riskOfConversion - added value of being able to buy coffee with 1 second blocks.

The market will determine the difference in value. Given convertibility the difference, +/-, will be small or the side chain (or possibly the main chain) will be abandoned, at which point there is no theoretical bound on the price. (Convertibility in theory doesn't matter if you run out of coins to convert.)

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October 24, 2014, 02:10:36 AM
 #14385

This is open source software. Even considering stealth development of a rogue sidechain, the moment they commit the code to a sidechain, the code is out there for everyone to see.

once it's determined the SC is better, the scBTC become more valuable than BTC.  the arb can't work b/c the SC chain is superior and therefore the scBTC are worth more than the BTC. those who moved first will be in a better position. once other BTC holders detect this, they will start to migrate to scBTC.  but the catch is:  there's a cost to do so. mining fees.


That would only work if ALL users decided to move to SCbtc and no user wanted to buy BTC under any circumstances, even with spreads in the thousands of dollars or more.  If the tech were that far superior then SCbtc deserves to win out.  In reality, there will most likely be debate over which system is better and not all users will convert, resulting in normal arbitration.

Quote
once miners detect this migration they will raise their fees to extortionist levels. they have to b/c accepting a devaluing BTC is risky. 

Most likely processing power would leave the main chain and fees would stay relatively sane because at some point users would refuse to pay the fees.

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October 24, 2014, 02:12:39 AM
 #14386

a) scBTC have less value than BTC

If you are talking about a 1:1 peg I don't see this, really. If it persists then people will just flee the SC and it will become irrelevant (absent some short term uses like paying for coffee perhaps).

If you are talking about a non-1:1 peg then it isn't clear to me that scBTC need necessarily be worth less than BTC. For example scBTC could pay dividends in some non-convertable asset.



I feel you and I agree with you.
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October 24, 2014, 02:19:11 AM
 #14387

That would only work if ALL users decided to move to SCbtc and no user wanted to buy BTC under any circumstances, even with spreads in the thousands of dollars or more.  If the tech were that far superior then SCbtc deserves to win out.  In reality, there will most likely be debate over which system is better and not all users will convert, resulting in normal arbitration.

People would certainly buy BTC if scBTC were worth more, but only at something less than the scBTC value in order to convert it and make a profit. There would be no reason to convert back, since you couldn't do that profitably and then sell to someone who wants to buy-and-convert, and no other demand would exist.

An objectively better chain would certainly rapidly replace an objectively worse one.

What would be peculiar in this case is if it happens while mining rewards still exist, since under the proposed side chain scheme, those are permanently tied to the main chain. In that case people will mine BTC solely for the purpose of converting it. There would be minimal transactions on the main chain (just conversions), so rewards would be the sole reason to mine. They would also merge mine scBTC for the transaction fees.

Once rewards go away, mining on the main chain would stop, and mining for fees would only happen on the side chain. A few stragglers might mine themselves (at relatively low difficulty) in order to process their own conversion transactions, or possibly everyone (other than lost coins) would have already converted.

(I don't believe mining-for-fees is workable, but that's independent of side chain vs. main chain.)


justusranvier
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October 24, 2014, 02:19:50 AM
 #14388

Two thoughts:

What would Satoshi think of sidechains?

(Hint: I suspect he likes them ... )

What if someone(s) involved with Blockstream is Satoshi?

Now it is all out in the open, like the source code, which for sidechains, does not even exist yet.
Why would this make any difference?

He'd need to prove his case to, just like everybody else.
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October 24, 2014, 02:21:05 AM
 #14389

(Hint: I suspect [Satoshi] likes them ... )

Based on what evidence

Quote
What if someone(s) involved with Blockstream is Satoshi?

Evidence?
Melbustus
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October 24, 2014, 02:35:23 AM
 #14390

...
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.
...


...
Value of BTC and sBTC are correlated, no matter the 1:x peg.
...


Are these statements actually true? You are both assuming that bitcoin is perpetually transferrable to the sidechain at some perpetually fixed exchange rate.

But, IIRC, the Blockstream crew said in the AMA that the exchange rate can be "any deterministic function", with the constraint that no more BTC can get transferred back to the bitcoin blockchain than got transferred out to begin with. That basically means anything. The rate can change with time, or any other input...as long as it's deterministic. For example:

Say a microtransactions sidechain is developed with a fixed supply of one-billion Micros, and an exchange rate of 1 BTC = 1 million Micros. That means that 1000BTC *total* will ever be able to move to the sidechain. Say the sidechain is very successful; ie, Micros work really well and start to gain a lot of real-world economic traction and value. So the 1000BTC gets transferred over.

Now say that Micros continue to see more use. Their purchasing power goes up, but this has no effect whatsoever on the purchasing power of bitcoin because the max has already moved in. Now all we have is another alt that *used to* have an easy decentralized way of buying it with bitcoin.

I'm frankly struggling to see how sidechains are anything more than an optional decentralized exchange mechanism between BTC and alts.




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BlindMayorBitcorn
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October 24, 2014, 02:37:50 AM
 #14391

Two thoughts:

What would Satoshi think of sidechains?

(Hint: I suspect he likes them ... )

What if someone(s) involved with Blockstream is Satoshi?

Now it is all out in the open, like the source code, which for sidechains, does not even exist yet.

That sound pretty legendary dude Shocked

Forgive my petulance and oft-times, I fear, ill-founded criticisms, and forgive me that I have, by this time, made your eyes and head ache with my long letter. But I cannot forgo hastily the pleasure and pride of thus conversing with you.
juju
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October 24, 2014, 02:40:18 AM
 #14392

Two thoughts:

What would Satoshi think of sidechains?

(Hint: I suspect he likes them ... )

What if someone(s) involved with Blockstream is Satoshi?

Now it is all out in the open, like the source code, which for sidechains, does not even exist yet.

Cool a speculation thread with people talking about SC, I read the paper the other day and almost cried. This is truly a thing of beauty, I remember writing on my notes: 21Million BTC | ∞  SC Assets

Alot of smart people working on that team/with, likely he has been involved at some stage unbeknownst to all or most.

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October 24, 2014, 03:04:54 AM
 #14393

That would only work if ALL users decided to move to SCbtc and no user wanted to buy BTC under any circumstances, even with spreads in the thousands of dollars or more.  If the tech were that far superior then SCbtc deserves to win out.  In reality, there will most likely be debate over which system is better and not all users will convert, resulting in normal arbitration.
People would certainly buy BTC if scBTC were worth more, but only at something less than the scBTC value in order to convert it and make a profit. There would be no reason to convert back

Yes there is reason to convert back.  You sell the scBTC at a profit and take the profit and buy more BTC to convert.  Rinse and repeat.

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October 24, 2014, 03:20:39 AM
 #14394

Two thoughts:

What would Satoshi think of sidechains?

(Hint: I suspect he likes them ... )

What if someone(s) involved with Blockstream is Satoshi?

Now it is all out in the open, like the source code, which for sidechains, does not even exist yet.

Cool a speculation thread with people talking about SC, I read the paper the other day and almost cried. This is truly a thing of beauty, I remember writing on my notes: 21Million BTC | ∞  SC Assets

Alot of smart people working on that team/with, likely he has been involved at some stage unbeknownst to all or most.


Sidechains seem to have no downsides for Bitcoin that I can see, and solve a bunch of really thorny problems.  As long as they are defensible it should have huge value for a greatly expanded Bitcoin userbase.  Probably for us BTC hodlers as well in monetary terms as well as for more philosophical aspects.  Some sidechains could be totally 'licensed' to the government's satisfaction so all of the big names could jump on board.

My guess is that there will be some who try desperately to yank out Satoshi's 1MB cap ASAP before it's to late.  As long as the cap is in place the system will be much more difficult to subvert or monopolize and that has been driving some clued in people crazy for as long as I've been watching things.


sig spam anywhere and self-moderated threads on the pol&soc board are for losers.
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October 24, 2014, 03:20:59 AM
 #14395

That would only work if ALL users decided to move to SCbtc and no user wanted to buy BTC under any circumstances, even with spreads in the thousands of dollars or more.  If the tech were that far superior then SCbtc deserves to win out.  In reality, there will most likely be debate over which system is better and not all users will convert, resulting in normal arbitration.
People would certainly buy BTC if scBTC were worth more, but only at something less than the scBTC value in order to convert it and make a profit. There would be no reason to convert back

Yes there is reason to convert back.  You sell the scBTC at a profit and take the profit and buy more BTC to convert.  Rinse and repeat.

if i were setting up a SC, i'd just fork Bitcoin, add an anonymity function, then let it run.  there'd be a good chance i could get a full on rush into my SC.
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October 24, 2014, 03:22:44 AM
 #14396


Say a microtransactions sidechain is developed with a fixed supply of one-billion Micros, and an exchange rate of 1 BTC = 1 million Micros. That means that 1000BTC *total* will ever be able to move to the sidechain. Say the sidechain is very successful; ie, Micros work really well and start to gain a lot of real-world economic traction and value. So the 1000BTC gets transferred over.

Now say that Micros continue to see more use. Their purchasing power goes up, but this has no effect whatsoever on the purchasing power of bitcoin because the max has already moved in. Now all we have is another alt that *used to* have an easy decentralized way of buying it with bitcoin.


Arbitrage.  For example:  All 1000 bitcoin are transferred and micros increase in value to the point that:

1 million micros = $800
1 bitcoin = $400

Anyone wanting to arb this spread can sell 1 million micros for $800, buy 1 bitcoin for $400, pocket $400, convert that 1 bitcoin to 1 million micros, rinse and repeat.  Most likely, one billion micros will never be in circulation at any point in time because of arbitrage.

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October 24, 2014, 03:29:21 AM
 #14397

That would only work if ALL users decided to move to SCbtc and no user wanted to buy BTC under any circumstances, even with spreads in the thousands of dollars or more.  If the tech were that far superior then SCbtc deserves to win out.  In reality, there will most likely be debate over which system is better and not all users will convert, resulting in normal arbitration.
People would certainly buy BTC if scBTC were worth more, but only at something less than the scBTC value in order to convert it and make a profit. There would be no reason to convert back

Yes there is reason to convert back.  You sell the scBTC at a profit and take the profit and buy more BTC to convert.  Rinse and repeat.

No that doesn't work once all the BTC are converted. The only ones you could possibly find to buy for conversion would be newly mined coins, and miners would have no reason to sell them to you. They can just convert themselves (which is what they would do).

The arbitrage you is exactly what would happen, but it would quickly convert all the BTC until there were none left, then the main chain would simply die (other than for mining purposes).



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October 24, 2014, 03:45:01 AM
 #14398

That would only work if ALL users decided to move to SCbtc and no user wanted to buy BTC under any circumstances, even with spreads in the thousands of dollars or more.  If the tech were that far superior then SCbtc deserves to win out.  In reality, there will most likely be debate over which system is better and not all users will convert, resulting in normal arbitration.
People would certainly buy BTC if scBTC were worth more, but only at something less than the scBTC value in order to convert it and make a profit. There would be no reason to convert back

Yes there is reason to convert back.  You sell the scBTC at a profit and take the profit and buy more BTC to convert.  Rinse and repeat.

No that doesn't work once all the BTC are converted. The only ones you could possibly find to buy for conversion would be newly mined coins, and miners would have no reason to sell them to you. They can just convert themselves (which is what they would do).

The arbitrage you is exactly what would happen, but it would quickly convert all the BTC until there were none left, then the main chain would simply die (other than for mining purposes).


That is a bold assumption, pun intended.  If I had a satoshi for every time someone said the price of bitcoin could go to 0, then I would be rich... as I said before, if the technology of SCbtc is that great, then it deserves to win.

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October 24, 2014, 03:48:24 AM
 #14399


Say a microtransactions sidechain is developed with a fixed supply of one-billion Micros, and an exchange rate of 1 BTC = 1 million Micros. That means that 1000BTC *total* will ever be able to move to the sidechain. Say the sidechain is very successful; ie, Micros work really well and start to gain a lot of real-world economic traction and value. So the 1000BTC gets transferred over.

Now say that Micros continue to see more use. Their purchasing power goes up, but this has no effect whatsoever on the purchasing power of bitcoin because the max has already moved in. Now all we have is another alt that *used to* have an easy decentralized way of buying it with bitcoin.


Arbitrage.  For example:  All 1000 bitcoin are transferred and micros increase in value to the point that:

1 million micros = $800
1 bitcoin = $400

Anyone wanting to arb this spread can sell 1 million micros for $800, buy 1 bitcoin for $400, pocket $400, convert that 1 bitcoin to 1 million micros, rinse and repeat.  Most likely, one billion micros will never be in circulation at any point in time because of arbitrage.


What if the exchange function specified that after time/block N, the exchange rate is 1 BTC = 0 Micros ? No more arb.

Not to be pedantic, but the point is that the exchange rate can be defined by "any deterministic function". Seems to me that there are probably many classes of deterministic functions which could prevent value from moving back to bitcoin.

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October 24, 2014, 03:58:44 AM
 #14400

Sidechains seem to have no downsides for Bitcoin that I can see, and solve a bunch of really thorny problems.  As long as they are defensible it should have huge value for a greatly expanded Bitcoin userbase.  Probably for us BTC hodlers as well in monetary terms as well as for more philosophical aspects.  Some sidechains could be totally 'licensed' to the government's satisfaction so all of the big names could jump on board.

My guess is that there will be some who try desperately to yank out Satoshi's 1MB cap ASAP before it's to late.  As long as the cap is in place the system will be much more difficult to subvert or monopolize and that has been driving some clued in people crazy for as long as I've been watching things.

tvbcof, can you take the tinfoil hat off now?

Sidechains may work brilliantly, and deliver lots of 2.0 applications, but this tech will not appear overnight. What is the point of star-ship Enterprise quality sidechains working off the MySpace of cryptocurrency?

Not raising blocksize, *at least* roughly allowing for Moore's Law, seems insane, and would just drive some alt to gain significant marketshare.

Absolutely.

No matter how good SC are, they are not a substitute for allowing the existing system to scale at the rate of the slowest improving computing technology: bandwidth.



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