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Author Topic: Gold collapsing. Bitcoin UP.  (Read 1807739 times)
Adrian-x
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October 30, 2014, 07:40:37 PM
 #15021

fundamentally, i disagree with the core observation of the Sidechain Whitepaper which originally stated (interestingly, it seems they've changed it):

"the core observation is that “Bitcoin” the blockchain is conceptually independent from “bitcoin” the asset: if we had technology
to support the movement of assets between blockchains, new systems could be developed which
users could adopt by simply reusing the existing bitcoin currency"


http://www.blockstream.com/sidechains.pdf

as i've said since the start of my participation in Bitcoin: Bitcoin the currency is inextricably linked and intertwined with its blockchain.  the blockchain is nothing without the currency.

i'd also flip that around by saying that Bitcoin the currency is nothing without its blockchain.

given all the potential risks and complexities introduced by Sidechains, are they something we should be serious about?

But they are not saying that in the way you suggest they are. Their point is not that Bitcoin the blockchain doesn't need "bitcoin" the asset but that the asset should not have to be tied only to the Bitcoin blockchain but could, conceptually, be used on other blockchains.



above is the reason, I disagree with what you are suggesting, bitcoin is the asset ledger, money is not the token but memory, you don't own bitcoin, you control a % of the asset ledger. Balance in value and security is maintained by miners making economic value judgments. For PoW to be rewarded appropriately to preserve the network and the distributed allocated of control, miners need to be incentivised . Nodes are incentivised to preserve the ledger because they have value in it, Miners are incentivised to wright to that ledger in lieu of a Block rewards.  

this is a dynamic equilibrium but in general if the Bitcoin network grows (number of users) one can expect the utility to grow as it has, (thanks Peter-R) according to Metacafe's law if it grows faster then the mining reward diminishes, then one  expects competition in mining to produce coins (miners - create "credit" in the immutable memory ledger called the block reward). What is expected to happen is: 1) innovation in mining efficiency to make better use of the limited and costly resources and energy; 2) miners will use any increase in efficiency to consume all available resource - Jevons paradox gives us a hit of what could be. if not for diminishing rewards to eventual just the cost of writing tx.  

in short efficiency in mining innovation is responsible for the hashrate, and the price of bitcoin is reasonable for the amount of energy burned. (energy being important as it is the root of all economic activity and productivity) PoW efficiency is a highly contentious issue among many in other threads, and there too the economics is also not well understood as opponents argue the energy burned and wasted while its clear to those who see it it is is not wasted and the dynamic and economics are sound.

If you tie other assets to the blockchain, by locking bitcoin in, you in effect are reducing bitcoins network and growing another network the SC, what happens then is the value grows in the other network, according to Metacafe's law, and the Bitcoin network is diminished. The result is lower block rewards, and less incentive to mine, all the while bitcoin holders can exchange into the new network further reducing Bitcoins value.

Bitcoin is a success precisely for all the reasons that make it, but a AltChain that leverages the value out of bitcoin, by differentiating bitcoin the currency form bitcoin the ledger, is created not as a competing innovation but as a for profit idea. truly competing ideas compete 1:1 head to head like alts, they dont peg 1:1 and drain the life out of the host.

We have the tech to do secure trust less off Blockchain micro transaction with technologies like micro payment channels, and we have the ability to create secured trust free BTC funds in an exchange or contract environment.

Given the obvious value proposition of the different aspects of sidechains (which you are not honest if you choose to ignore) I would say it is only fair to give the runner a chance to prove itself.

I have not seen any examples of obvious value proposition for SC from an economic point of view that can't effectively be addresses with existing technology. The only one I have respect for is to make the investors money but i dont like that it comes with a risk to Bitcoin, and bitcoin holders.

Are there any examples?


  


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October 30, 2014, 07:45:49 PM
 #15022

Of course the only thing protecting bitcoin from losing its MC status is the block subsidy, so there is real risk that over time bitcoin could cease to be the main chain.

so then you're effectively saying we have to have inflation in BTC for the Bitcoin MC to survive/compete over the long run when put up against a SC issuing a sidecoin and accepting scBTC.

i don't desire that and i certainly don't want to be moving my BTC to a SC.
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October 30, 2014, 07:53:26 PM
 #15023

Basic theory suggests that mining will always become unprofitable no matter what the various magnitudes of various parameters.  We've seen in practice that this theory seems correct.  What kind of sucks about this is that the value spikes have created conditions for more sha256 hashing power to develop than can be comfortably supported by transaction fees.  At least when Bitcoin is used for buying trinkets.

The problem with this is that it could make economic sense for miners to attack Bitcoin, and this is particularly the case if they are going to throw in the towel on Bitcoin and consider their gear to be a write-off.  Some combination of economics and corp/gov coercion could provoke such a decision.

Two things which could help offset this threat would be:

  1) increase fees to increase the reward for properly supporting Bitcoin.

  2) provide a profitable outlet for the hashing power in such a way that supports Bitcoin rather than considers it dead.

  3) break mining pools into smaller pieces with more focused goals and in doing so reduce the potential for consolidated strategies to be implemented.

Sidechains seem to me to have the potential to promote all three of these desirable outcomes.
The problem isn't that Bitcoin is used for buying trinkets - the problem is that Bitcoin isn't being used enough for buying trinkets.

The economics of mining are going to stay fucked up until the transaction rate grows about three orders of magnitude.

We just have to find a way to get from here to that point - after that it will take care of itself.


well said, the problem isn't technical its adoption of the idea or cryptocurrency, everything flows from faith in Bitcoin.

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October 30, 2014, 08:01:31 PM
 #15024

Of course the only thing protecting bitcoin from losing its MC status is the block subsidy, so there is real risk that over time bitcoin could cease to be the main chain.

that's it! miners only do what they do for incentives, SC give miners new incentives the result is neglecting the value stored in the Bitcoin Blockchain as it moves to the SC. for Bitcoin to grow it needs competition not a transfer of value.
 

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October 30, 2014, 08:17:24 PM
 #15025

i've always said this:   Bitcoin: "A Self-Contained Financial System"

that means the bitcoins themselves HAVE to stay on the blockchain from which they were created.  if you move them to a different blockchain (SC's), the dynamic changes entirely especially the security model.  you will destroy Bitcoin.
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October 30, 2014, 08:25:50 PM
 #15026

http://siliconangle.tv/cubeconversations-ted-rogers-xapo/

The guys at Xapo have the clearest vision out of any of the major Bitcoin companies IMO. They are spot on and great spokespeople for Bitcoin.

Rarely do we hear these type of guys say "hold on to your Bitcoins, they're going to be worth more"


"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 30, 2014, 08:36:26 PM
 #15027

Of course the only thing protecting bitcoin from losing its MC status is the block subsidy, so there is real risk that over time bitcoin could cease to be the main chain.

so then you're effectively saying we have to have inflation in BTC for the Bitcoin MC to survive/compete over the long run when put up against a SC issuing a sidecoin and accepting scBTC.

i don't desire that and i certainly don't want to be moving my BTC to a SC.

You either risk a side chain overtaking bitcoin or an alt coin overtaking bitcoin.  With the side chain you have the risk free put to take advantage of if the side chain wins out.  The alt coin would have a harder time winning without the risk free put, but it could happen.  Pick your poison.

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October 30, 2014, 08:48:19 PM
 #15028

here is an interesting Jim Rickards video I happened to watch. he mentions Bitcoin out of the blue.

http://youtu.be/RVoMSJ4sry8?t=13m40s (just the snip leading up to Bitcoin - I found the full 20 min interesting.

What I found alarming: is firs he talks about "fiat" as print money, doesn't use the dirty fiat word that is so prevalent on this forum.
and second, he preemptively throws in Bitcoin - notably missing is rai stone in his comparison as he lumps it in with paper and feathers, but clearly on the radar as a competitor to Gold. 

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October 30, 2014, 08:55:31 PM
 #15029

Of course the only thing protecting bitcoin from losing its MC status is the block subsidy, so there is real risk that over time bitcoin could cease to be the main chain.

so then you're effectively saying we have to have inflation in BTC for the Bitcoin MC to survive/compete over the long run when put up against a SC issuing a sidecoin and accepting scBTC.

i don't desire that and i certainly don't want to be moving my BTC to a SC.

You either risk a side chain overtaking bitcoin or an alt coin overtaking bitcoin.  With the side chain you have the risk free put to take advantage of if the side chain wins out.  The alt coin would have a harder time winning without the risk free put, but it could happen.  Pick your poison.

I like the head to head competition offered by Alts, Bitcoin is still very risky as an idea, no need to confuse risks, the successful SC may have features more akin to our current economic model that is more attractive to the masses - the momentum that give it fuel to surpass Bitcoin the downside is the loss of the hope Bitcoin represents with Gold 2.0 today.

Pick your poison.

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October 30, 2014, 09:16:53 PM
 #15030

here is an interesting Jim Rickards video I happened to watch. he mentions Bitcoin out of the blue.

http://youtu.be/RVoMSJ4sry8?t=13m40s (just the snip leading up to Bitcoin - I found the full 20 min interesting.

What I found alarming: is firs he talks about "fiat" as print money, doesn't use the dirty fiat word that is so prevalent on this forum.
and second, he preemptively throws in Bitcoin - notably missing is rai stone in his comparison as he lumps it in with paper and feathers, but clearly on the radar as a competitor to Gold.  

he also says something very important: anything can be used as money, but what actually is money is determined by the confidence people have in it, and "why should I have confidence? It's a matter of trust".

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October 30, 2014, 09:22:07 PM
 #15031

Of course the only thing protecting bitcoin from losing its MC status is the block subsidy, so there is real risk that over time bitcoin could cease to be the main chain.

so then you're effectively saying we have to have inflation in BTC for the Bitcoin MC to survive/compete over the long run when put up against a SC issuing a sidecoin and accepting scBTC.

i don't desire that and i certainly don't want to be moving my BTC to a SC.

You either risk a side chain overtaking bitcoin or an alt coin overtaking bitcoin.  With the side chain you have the risk free put to take advantage of if the side chain wins out.  The alt coin would have a harder time winning without the risk free put, but it could happen.  Pick your poison.

you're presuming it is impossible for Bitcoin to upgrade itself.  that's incorrect.  we've seen it upgraded many times in the past several years.

Gavin and Wladimir are working on some very valuable upgrades as we speak.  what's the rush to implement something that could destroy the whole system?
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October 30, 2014, 09:22:36 PM
 #15032

above is the reason, I disagree with what you are suggesting, bitcoin is the asset ledger, money is not the token but memory, you don't own bitcoin, you control a % of the asset ledger. Balance in value and security is maintained by miners making economic value judgments. For PoW to be rewarded appropriately to preserve the network and the distributed allocated of control, miners need to be incentivised . Nodes are incentivised to preserve the ledger because they have value in it, Miners are incentivised to wright to that ledger in lieu of a Block rewards.  

this is a dynamic equilibrium but in general if the Bitcoin network grows (number of users) one can expect the utility to grow as it has, (thanks Peter-R) according to Metacafe's law if it grows faster then the mining reward diminishes, then one  expects competition in mining to produce coins (miners - create "credit" in the immutable memory ledger called the block reward). What is expected to happen is: 1) innovation in mining efficiency to make better use of the limited and costly resources and energy; 2) miners will use any increase in efficiency to consume all available resource - Jevons paradox gives us a hit of what could be. if not for diminishing rewards to eventual just the cost of writing tx.  

in short efficiency in mining innovation is responsible for the hashrate, and the price of bitcoin is reasonable for the amount of energy burned. (energy being important as it is the root of all economic activity and productivity) PoW efficiency is a highly contentious issue among many in other threads, and there too the economics is also not well understood as opponents argue the energy burned and wasted while its clear to those who see it it is is not wasted and the dynamic and economics are sound.

If you tie other assets to the blockchain, by locking bitcoin in, you in effect are reducing bitcoins network and growing another network the SC, what happens then is the value grows in the other network, according to Metacafe's law, and the Bitcoin network is diminished. The result is lower block rewards, and less incentive to mine, all the while bitcoin holders can exchange into the new network further reducing Bitcoins value.

Bitcoin is a success precisely for all the reasons that make it, but a AltChain that leverages the value out of bitcoin, by differentiating bitcoin the currency form bitcoin the ledger, is created not as a competing innovation but as a for profit idea. truly competing ideas compete 1:1 head to head like alts, they dont peg 1:1 and drain the life out of the host.

We have the tech to do secure trust less off Blockchain micro transaction with technologies like micro payment channels, and we have the ability to create secured trust free BTC funds in an exchange or contract environment.

Now, that, is a well opinionated, sensible and valid argument for the danger of SC. I had never considered it from that angle and it does make a lot of sense. None of that conspiracy theory, whale speculative attack, developer collusion tinfoil hat type of stuff.

I do have some questions though

Quote
The result is lower block rewards, and less incentive to mine, all the while bitcoin holders can exchange into the new network further reducing Bitcoins value.

How do you explain lower block reward? My understanding is block reward remains the same no matter the size of the mining infrastructure.

Also, I don't see how 1:1 peg drains the lift out of the host. Think of the main chain as a reserve account and sidechains as checking account. A well designed, 1:1 peg of Bitcoin that works in synergy with the main chain does not diminish the network IMO. These chains are effectively sub-chains.

Here is a rational proposition :

You have the Bitcoin main-chain and two sidechains : one for privacy and one for micro-transactions. Do you not agree that these can work in synergy and ultimately add value to the network by being supported by the same underlying currency (or technically BTC and BTC-peg). In fact, there is more incentives more miners to mine considering the expected increase in transactions and effective use of the network.

From my point of view it certainly is more beneficial to BTC than having Bitcoin and two other alt-coins that serve these features. I also fail to understand your arguments that these chains (in my example) would work as "for-profit" ideas.

"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 30, 2014, 09:55:01 PM
 #15033

Of course the only thing protecting bitcoin from losing its MC status is the block subsidy, so there is real risk that over time bitcoin could cease to be the main chain.

so then you're effectively saying we have to have inflation in BTC for the Bitcoin MC to survive/compete over the long run when put up against a SC issuing a sidecoin and accepting scBTC.

i don't desire that and i certainly don't want to be moving my BTC to a SC.

You either risk a side chain overtaking bitcoin or an alt coin overtaking bitcoin.  With the side chain you have the risk free put to take advantage of if the side chain wins out.  The alt coin would have a harder time winning without the risk free put, but it could happen.  Pick your poison.

you're presuming it is impossible for Bitcoin to upgrade itself.  that's incorrect.  we've seen it upgraded many times in the past several years.

Gavin and Wladimir are working on some very valuable upgrades as we speak.  what's the rush to implement something that could destroy the whole system?

Future upgrades won't be easy and potentially pose just as much risk, especially as the stakes get higher, and some upgrades may be impossible without sidechains.  This side chains proposal will be difficult enough to push through.  If it works, then innovation can be pushed out to the side chains, which won't pose as much risk to bitcoin.  Changes to the Bitcoin core protocol will pose signifiCanty more risk than changes to side chains.

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October 30, 2014, 09:55:36 PM
 #15034

above is the reason, I disagree with what you are suggesting, bitcoin is the asset ledger, money is not the token but memory, you don't own bitcoin, you control a % of the asset ledger. Balance in value and security is maintained by miners making economic value judgments. For PoW to be rewarded appropriately to preserve the network and the distributed allocated of control, miners need to be incentivised . Nodes are incentivised to preserve the ledger because they have value in it, Miners are incentivised to wright to that ledger in lieu of a Block rewards.  

this is a dynamic equilibrium but in general if the Bitcoin network grows (number of users) one can expect the utility to grow as it has, (thanks Peter-R) according to Metacafe's law if it grows faster then the mining reward diminishes, then one  expects competition in mining to produce coins (miners - create "credit" in the immutable memory ledger called the block reward). What is expected to happen is: 1) innovation in mining efficiency to make better use of the limited and costly resources and energy; 2) miners will use any increase in efficiency to consume all available resource - Jevons paradox gives us a hit of what could be. if not for diminishing rewards to eventual just the cost of writing tx.  

in short efficiency in mining innovation is responsible for the hashrate, and the price of bitcoin is reasonable for the amount of energy burned. (energy being important as it is the root of all economic activity and productivity) PoW efficiency is a highly contentious issue among many in other threads, and there too the economics is also not well understood as opponents argue the energy burned and wasted while its clear to those who see it it is is not wasted and the dynamic and economics are sound.

If you tie other assets to the blockchain, by locking bitcoin in, you in effect are reducing bitcoins network and growing another network the SC, what happens then is the value grows in the other network, according to Metacafe's law, and the Bitcoin network is diminished. The result is lower block rewards, and less incentive to mine, all the while bitcoin holders can exchange into the new network further reducing Bitcoins value.

Bitcoin is a success precisely for all the reasons that make it, but a AltChain that leverages the value out of bitcoin, by differentiating bitcoin the currency form bitcoin the ledger, is created not as a competing innovation but as a for profit idea. truly competing ideas compete 1:1 head to head like alts, they dont peg 1:1 and drain the life out of the host.

We have the tech to do secure trust less off Blockchain micro transaction with technologies like micro payment channels, and we have the ability to create secured trust free BTC funds in an exchange or contract environment.

Now, that, is a well opinionated, sensible and valid argument for the danger of SC. I had never considered it from that angle and it does make a lot of sense. None of that conspiracy theory, whale speculative attack, developer collusion tinfoil hat type of stuff.

I do have some questions though

Quote
The result is lower block rewards, and less incentive to mine, all the while bitcoin holders can exchange into the new network further reducing Bitcoins value.

How do you explain lower block reward? My understanding is block reward remains the same no matter the size of the mining infrastructure.

what he's saying is that over the long run, Bitcoin miners will have to make the transition from depending on block rewards to that of being paid in tx fees.  that is b/c of he block reward halving every 4 yrs.  this dynamic has a chance of avoiding the Tragedy of the Commons if Bitcoin can attract enough users in the future to increase tx fees in aggregate to compensate for the block reward halvings.  

Quote

Also, I don't see how 1:1 peg drains the lift out of the host. Think of the main chain as a reserve account and sidechains as checking account. A well designed, 1:1 peg of Bitcoin that works in synergy with the main chain does not diminish the network IMO. These chains are effectively sub-chains.

Here is a rational proposition :

You have the Bitcoin main-chain and two sidechains : one for privacy and one for micro-transactions. Do you not agree that these can work in synergy and ultimately add value to the network by being supported by the same underlying currency (or technically BTC and BTC-peg). In fact, there is more incentives more miners to mine considering the expected increase in transactions and effective use of the network.

those who actually use BTC on a daily basis, as opposed to those hodling, will be encouraged to move to the SC's to perform their tx's b/c of the innovations of privacy and microtransactions.  those miners on the SC's will be the one's getting paid the tx fees from these users instead of the miners who elect to stay behind on the BTC MC.  that's not good for Bitcoin or those miners as the block rewards diminish.  that's where the draining the life out of Bitcoin comes from as miners will have to defect to the SC to get paid over time.
Quote

From my point of view it certainly is more beneficial to BTC than having Bitcoin and two other alt-coins that serve these features. I also fail to understand your arguments that these chains (in my example) would work as "for-profit" ideas.

i think he's saying, and correct me if i'm wrong, that it's unethical for Blockstream to capitalize on Bitcoin's success and their privileged position as maintainers of the source code to create SC's as a competitor.  especially when the SC's have the chance to destroy the MC.
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October 30, 2014, 10:10:15 PM
 #15035

those who actually use BTC on a daily basis, as opposed to those hodling, will be encouraged to move to the SC's to perform their tx's b/c of the innovations of privacy and microtransactions.  those miners on the SC's will be the one's getting paid the tx fees from these users instead of the miners who elect to stay behind on the BTC MC.  that's not good for Bitcoin.  that's where the draining the life out of Bitcoin comes from as miners will have to defect to the SC to get paid over time.

...

i think he's saying, and correct me if i'm wrong, that it's unethical for Blockstream to capitalize on Bitcoin's success by creating SC's as a competitor effectively.  especially when the SC's have the chance to destroy the MC.

Then Bitcoin becomes the central clearing house, reserve & store of value chain while other chains are left to operate daily transactions for better efficiency.

People have been proposing this very idea for awhile but assumed the transactions would be handled off-chain by semi-centralized entities. Sidechain removes the need for that.

Miners can mine BTC & the sidechain. I'm not sure where you get the idea they have to choose between the two.

As for your last point, I categorically disagree. Sidechains are a neutral, technological proposition. If Blockstream profit from them it is because they will have shown to be considerably useful for the development of blockchain platforms, not because it competes with Bitcoin, this makes no sense.

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October 30, 2014, 10:19:04 PM
 #15036

those who actually use BTC on a daily basis, as opposed to those hodling, will be encouraged to move to the SC's to perform their tx's b/c of the innovations of privacy and microtransactions.  those miners on the SC's will be the one's getting paid the tx fees from these users instead of the miners who elect to stay behind on the BTC MC.  that's not good for Bitcoin.  that's where the draining the life out of Bitcoin comes from as miners will have to defect to the SC to get paid over time.

...

i think he's saying, and correct me if i'm wrong, that it's unethical for Blockstream to capitalize on Bitcoin's success by creating SC's as a competitor effectively.  especially when the SC's have the chance to destroy the MC.

Then Bitcoin becomes the central clearing house, reserve & store of value chain while other chains are left to operate daily transactions for better efficiency.

how do you propose the Bitcoin miners get paid over the long run on the MC when the block rewards have been diminished and all the tx's are occurring on the SC's?
Quote

People have been proposing this very idea for awhile but assumed the transactions would be handled off-chain by semi-centralized entities. Sidechain removes the need for that.

actually, SC's will exacerbate the problem of tx fees moving off the MC due to the risk free put.  at least when they're handled at a centralizaed entity like Coinbase, there is some fear their accts may be seized along with all their BTC, like what happened with Silk Road.  at least we have a dampener effect there.
Quote

Miners can mine BTC & the sidechain. I'm not sure where you get the idea they have to choose between the two.

over the long run they will have to as block rewards diminish and all tx's are occurring on SC's
Quote

As for your last point, I categorically disagree. Sidechains are a neutral, technological proposition. If Blockstream profit from them it is because they will have shown to be considerably useful for the development of blockchain platforms, not because it competes with Bitcoin, this makes no sense.

if they were neutral, they wouldn't be insisting on a change in the source code which uniquely benefits their for profit business model.
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October 30, 2014, 10:25:09 PM
 #15037

Then Bitcoin becomes the central clearing house, reserve & store of value chain while other chains are left to operate daily transactions for better efficiency.

People have been proposing this very idea for awhile but assumed the transactions would be handled off-chain by semi-centralized entities.
People have been proposing this because they are economically ignorant.

There is no such thing as intrinsic value. Currencies only have value if people use them, so there is no way for Bitcoin to have behave as a store of value in the long term except as a direct consequence of its use as a medium of exchange.

Before you start talking about gold - no, it won't work that way.

Prior to central banks, gold behaved as a store of value because it was used as a medium of exchange.

After central banks, gold behaved as a store of value because of taxation.

Bitcoin could never survive as a high-fee settlement currency because high fees would arise due to block size rationing, not because transactions should naturally cost that much for technical reasons. Bitcoin would lose out to a competing currency with less/no rationing that would be less expensive to use for settlements.

High transaction rates on the main chain are the only way for Bitcoin to survive. Yes, getting there is a difficult technical problem to solve. Deal with it.
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October 30, 2014, 10:35:13 PM
 #15038

how do you propose the Bitcoin miners get paid over the long run on the MC when the block rewards have been diminished and all the tx's are occurring on the SC's?

Miners will continue mining both chains. The much larger transactions not requiring privacy and/or instant confirmation will be taking place on the more secure mainchain. Miners will be paid from processing transactions on every chain working in synergy.

over the long run they will have to as block rewards diminish and all tx's are occurring on SC's

Stop using hyperboles, no not all of the transactions will occur on the sidechains. Moreover, no they will not have to choose between the two. They can continue mining both. I really fail to see your argument here.

if they were neutral, they wouldn't be insisting on a change in the source code which uniquely benefits their for profit business model.

Insisting? I have read a proposition but have not seen sign of insistence. Their business model is innovation on top of the sidechain "protocol". They have no incentive to compete with Bitcoin since by all account they are planning to leverage it. Bitcoin is vital to their business model.

"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 30, 2014, 10:59:13 PM
 #15039

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The result is lower block rewards, and less incentive to mine, all the while bitcoin holders can exchange into the new network further reducing Bitcoins value.

How do you explain lower block reward? My understanding is block reward remains the same no matter the size of the mining infrastructure.
Bitcoin block rewards shrink as we know, but soon like 6 years it would be feasible to consider the transaction fee making up a significant part of the block reward. moving those fees to a SC would degrade Bitcoin. 

Also, I don't see how 1:1 peg drains the lift life out of the host. Think of the main chain as a reserve account and sidechains as checking account. A well designed, 1:1 peg of Bitcoin that works in synergy with the main chain does not diminish the network IMO. These chains are effectively sub-chains.
at the moment you are growing the network if you invest in Alts, here is one eg. during the peek of DarkCoin, i was looking to see what the fuss was about and checking for an exit point. The biggest stall to the exponential growth was the KYC rules in place with Bitcoin gate keepers, manly it was diffident to buy Dark because people interested couldn't be hassled with going through BTC.

BTC may always be a bit geeky and not suitable for the masses, (still suitable for a reserve currency though) but imagine we do through a crises and you can transfer from your bank account directly into a SC and you can avoid the whole bitcoin exchange experiences with all the benefits of a 1:1 backing. you would use the better option, in that scenario the SC has a hider demand than bitcoin and speculators take advantage of arbitration. and bitcoins move into the side chain, and the Bitcoin network shrivels, and stop growing because miners cant make a profit from the transaction fees.

your vision of bitcoin being the backing for all of chain growth is only viable so long as Bitcoin is the MC, when it stops being the MC due to the Metacafe's law the SC will absorb and shake themselves of it, the SC may have an inflation sachem that rewards miners in a more favorably, be better amalgamated with the Banking carrells and it is not a stretch to see bitcoin being abandoned, or even needed.

SC that take improve on bitcoins utility do it by inflating value off chain, and bitcoin dosn't grow the SC grows.
   
Here is a rational proposition :

You have the Bitcoin main-chain and two sidechains : one for privacy and one for micro-transactions. Do you not agree that these can work in synergy and ultimately add value to the network by being supported by the same underlying currency (or technically BTC and BTC-peg). In fact, there is more incentives more miners to mine considering the expected increase in transactions and effective use of the network.

From my point of view it certainly is more beneficial to BTC than having Bitcoin and two other alt-coins that serve these features. I also fail to understand your arguments that these chains (in my example) would work as "for-profit" ideas.

micro-transactions are mute, Ive seen trust free technical solutions for this innovation with micro payment channels and potential with OT.

its not so much that the user case for SC to enable anonymity is not beneficial, the issue is you get the value leaking problem if the SC are beneficial. anonymity isn't so great when you want to prove you made a payment. at this point in time it is the No. 1 Killer app as there are lots of stolen coins wanting to come out, and it would help Bitcoin grow like in silk road commerce.

but ultimately Bitcoins Pseudonymity is forcing decentralized trust free serves like OpenBazaar and OT exchanges where your identity is never revealed, or if it is you chose which one. Decentralized and trust free everything is much more valuable then anonymous BTC, in a decentralized trust free world Pseudonymity is anonymity 

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Bitcoin replaces central, not commercial, banks


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October 30, 2014, 11:00:43 PM
 #15040

People have been proposing this because they are economically ignorant.

There is no such thing as intrinsic value. Currencies only have value if people use them, so there is no way for Bitcoin to have behave as a store of value in the long term except as a direct consequence of its use as a medium of exchange.

Before you start talking about gold - no, it won't work that way.

Prior to central banks, gold behaved as a store of value because it was used as a medium of exchange.

After central banks, gold behaved as a store of value because of taxation.

Bitcoin could never survive as a high-fee settlement currency because high fees would arise due to block size rationing, not because transactions should naturally cost that much for technical reasons. Bitcoin would lose out to a competing currency with less/no rationing that would be less expensive to use for settlements.

High transaction rates on the main chain are the only way for Bitcoin to survive. Yes, getting there is a difficult technical problem to solve. Deal with it.

Where did you get the idea of intrinsic value? I can't find it in my comments.

I don't agree with your comments. Bitcoin will be used as a medium-of-exchange, only, by proxy, through a BTC-pegged unit on a more efficient sidechain. I know you will say money doesn't require backing but in the case of Bitcoin it does not matter.

On the contrary, I find the comparison to gold to be excellent. I know we all hate fiat for what it has become but the fiat technology was a fantastic idea and for a moment a great advancement for our society. It came out of necessity for a more transportable and convenient mean of exchange. Much like gold, Bitcoin's transportation property suffers from some shortcomings : confirmation time & transparency.

On the other hand, unlike gold-backing Bitcoin-backing is fundamentally different in that there is no counterparty risks. The pegging can not be abused by the backers. For this reason Bitcoin is the perfect reserve currency.

Bitcoin could never survive as a high-fee settlement currency because high fees would arise due to block size rationing, not because transactions should naturally cost that much for technical reasons. Bitcoin would lose out to a competing currency with less/no rationing that would be less expensive to use for settlements.

High transaction rates on the main chain are the only way for Bitcoin to survive. Yes, getting there is a difficult technical problem to solve. Deal with it.

High-fee? This is not what I am suggesting, more like high-volume. Block size rationing are a whole different debate.

"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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