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Author Topic: Gold collapsing. Bitcoin UP.  (Read 1977544 times)
Adrian-x
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November 01, 2014, 07:53:28 PM
 #15221

I read it but I feel like I'm missing something:

Quote
its a 2 way peg, so both BTC and scBTC can move freely back and forth.
Can you elaborate? How are the both to be pegged? How is the peg rate determined, and does it float?

Since you are free to move coins between BTC and scBTC, the price will be the same. You don't sell scBTC for a lower price when you can transfer it back to BTC and sell it for the full price.

Correct.  I think its worth clarifying that the peg is algorithmic, because its seems from the thread that some people may not understand that.  You, personally, can ask the network automatically to swap unlimited quantities of BTC on the sidechain for BTC on the main bitcoin chain.

The only reason to swap with users using atomic swaps or trades is to do that faster.  No one is going to take anything other than a negligible price difference because they can click a button and move the coins between chains themselves.

Further because that 2wp backstop is there, and anyone and his dog can do arbitrage, with full confidence that they'll be able to exercise the 2wp and capitalise on the small time-preference, the will be small.  It seems just as likely that the sidechain coins sell at a small premium for the time-preference access to side-chain features.  (Time-preference means someones preference to gain access to something sooner rather than waiting eg 24hrs, and they'll sometimes be willing to pay a small fee to get it earlier, eg check advances or such things).

I dont think it realistic that we would see anyone willing to sell sidechain BTC at anything significantly below par in either direction, to do so is to burn money needlessly.  People will arbitrage it and its open to anyone to arbitrage.  So unless someone wants to burn money (and bitcoin already supports proof of burn or pay to miners if you're into burning money or donating to miners), no one will be offering to swap sidechain BTC for BTC at anything far below or above $350 (assuming current market price of $350).  eg $349.50 to $350.50 might be an example which is 15 basis points, that'd give someone a 15% return on an annual basis with steady arbitrage for a 2 day clearance time on the peg.  They can maybe get a higher return (and hence be willing to offer even lower margins) by holding a float on both sides and cancelling some trades against others as those happen faster so they get more than one arbitrage fee per exercise of the 2wp.

Obviously no one is encouraging anyone to put real money into untested or buggy sidechains.  I dont think there will be lots of sidechains and the main sidechains will be extremely well tested and coded to the same rigor as bitcoin itself.

Adam

That's an idealistic assumption money laundering can cost much over a 10% burn, unsuspecting traders take the arb.

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Adrian-x
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November 01, 2014, 08:04:30 PM
 #15222

- snip - one of many desperate lines of FUD -
...
I keep thinking I'm missing something obvious, because this seems a ridiculous train of thought from you. Is the bear market getting to you? Tongue


Something is making the guy soil himself multiple times per day.  Probably being wrong for nearly a year is contributing as stress, but it doesn't really help shed light on the root cause of his malady.



That's insulting. I've outline why SC will leach value out of Bitcoin and the most viable argument against my point is exchanging value on a side chain. I.e. using side chains as money is using Bitcoin.

It's not no Bitcoin TX fees are paid and the value created by the network effect reside on the SC.

There is no 1:1 peg guarantee. If the SC is inflationary and appeals to a central bank more than Bitcoin they'll use that not BTC. And the minority who want BTC hard money will be eaten for breakfast.

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November 01, 2014, 08:10:49 PM
 #15223

I hugely disagree with the belief that sidechains will decrease the value of Bitcoin. Having more uses for the Bitcoin blockchain will almost certainly increase its value, rather than decreasing it.

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November 01, 2014, 08:19:21 PM
 #15224

- snip - one of many desperate lines of FUD -
...
I keep thinking I'm missing something obvious, because this seems a ridiculous train of thought from you. Is the bear market getting to you? Tongue


Something is making the guy soil himself multiple times per day.  Probably being wrong for nearly a year is contributing as stress, but it doesn't really help shed light on the root cause of his malady.



That's insulting. I've outline why SC will leach value out of Bitcoin and the most viable argument against my point is exchanging value on a side chain. I.e. using side chains as money is using Bitcoin.

It's not no Bitcoin TX fees are paid and the value created by the network effect reside on the SC.

There is no 1:1 peg guarantee. If the SC is inflationary and appeals to a central bank more than Bitcoin they'll use that not BTC. And the minority who want BTC hard money will be eaten for breakfast.

the guy is not known for his manners.  in fact, if i say one thing, you can be guaranteed he'll just say the opposite to disagree.
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November 01, 2014, 08:21:48 PM
 #15225

I read it but I feel like I'm missing something:

Quote
its a 2 way peg, so both BTC and scBTC can move freely back and forth.
Can you elaborate? How are the both to be pegged? How is the peg rate determined, and does it float?

Since you are free to move coins between BTC and scBTC, the price will be the same. You don't sell scBTC for a lower price when you can transfer it back to BTC and sell it for the full price.

Correct.  I think its worth clarifying that the peg is algorithmic, because its seems from the thread that some people may not understand that.  You, personally, can ask the network automatically to swap unlimited quantities of BTC on the sidechain for BTC on the main bitcoin chain.

The only reason to swap with users using atomic swaps or trades is to do that faster.  No one is going to take anything other than a negligible price difference because they can click a button and move the coins between chains themselves.

Further because that 2wp backstop is there, and anyone and his dog can do arbitrage, with full confidence that they'll be able to exercise the 2wp and capitalise on the small time-preference, the will be small.  It seems just as likely that the sidechain coins sell at a small premium for the time-preference access to side-chain features.  (Time-preference means someones preference to gain access to something sooner rather than waiting eg 24hrs, and they'll sometimes be willing to pay a small fee to get it earlier, eg check advances or such things).

I dont think it realistic that we would see anyone willing to sell sidechain BTC at anything significantly below par in either direction, to do so is to burn money needlessly.  People will arbitrage it and its open to anyone to arbitrage.  So unless someone wants to burn money (and bitcoin already supports proof of burn or pay to miners if you're into burning money or donating to miners), no one will be offering to swap sidechain BTC for BTC at anything far below or above $350 (assuming current market price of $350).  eg $349.50 to $350.50 might be an example which is 15 basis points, that'd give someone a 15% return on an annual basis with steady arbitrage for a 2 day clearance time on the peg.  They can maybe get a higher return (and hence be willing to offer even lower margins) by holding a float on both sides and cancelling some trades against others as those happen faster so they get more than one arbitrage fee per exercise of the 2wp.

Obviously no one is encouraging anyone to put real money into untested or buggy sidechains.  I dont think there will be lots of sidechains and the main sidechains will be extremely well tested and coded to the same rigor as bitcoin itself.

Adam

we already know from your paper that there will be at least a delay (2d?) due to the contest/confirmation time.  also, the SPV proof is untested, unless you want to claim it's perfect/unhackable right here and now, which would be foolish.  these factors alone will ensure that there is a difference btwn the BTC and scBTC fiat price.  its not an instantaneous transfer.
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November 01, 2014, 08:24:09 PM
 #15226

I hugely disagree with the belief that sidechains will decrease the value of Bitcoin. Having more uses for the Bitcoin blockchain will almost certainly increase its value, rather than decreasing it.

and i hugely disagree.  you would have to know ahead of time that the SC innovation would at least offset the known decrease in security of the SC due to MM exactly to get a full value transfer from BTC to scBTC in terms of fiat.

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November 01, 2014, 08:43:01 PM
 #15227


we already know from your paper that there will be at least a delay due to the contest/confirmation time.  also, the SPV proof is untested, unless you want to claim it's perfect right here and now, which would be foolish.  these factors alone will ensure that there is a difference btwn the BTC and scBTC.

You first must burn bitcoins into SC.

So if you burn 10M of 13M BTC then the rest 3M BTC will increase in scarcity drastically. (3.25 times more scarce)
Then if  scBTC will become worthless and tokens inaccessible then all value(market cap, not tokens) will be returned to BTC.
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November 01, 2014, 08:45:43 PM
 #15228


we already know from your paper that there will be at least a delay due to the contest/confirmation time.  also, the SPV proof is untested, unless you want to claim it's perfect right here and now, which would be foolish.  these factors alone will ensure that there is a difference btwn the BTC and scBTC.

You first must burn bitcoins into SC.

So if you burn 10M of 13M BTC then the rest 3M BTC will increase in scarcity drastically. (3.25 times more scarce)
Then if  scBTC will become worthless and tokens inaccessible then all value(market cap, not tokens) will be returned to BTC.

THAT will definitely not happen.  otherwise, the scBTC will be transferred back to BTC almost immediately.  or in fact, they would never move at all.  

let me put it in simple terms w/o numbers.

you're taking a chunk of coin off a very secure ledger and moving them over to a less secure ledger.  it's to be expected those coins moved will be worth less b/c they are now less secure.  

b/c of arbitrage, you can expect the moved coin to drag down the price of the not moved coin to a lower equilibrium.
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November 01, 2014, 08:49:15 PM
 #15229

Here's a though experiment. Consider bitcoin and litecoin. They are now distinct, floating. Let's say someone pegs litecoin to bitcoin at a certain ratio, exterminating the litecoins in the process. Let's say 1:1 or 1:4, doesn't matter (as long as it is lower than the floating ratio).

What would happen? Litecoin users would hurry to sell their litecoins to the pegging reserve bank. On that transaction they would currently earn 76 USD per litecoin. Not many people would prefer to hold the litecoins. Litecoin would die.

So if a sidecoin is automatically pegged at a level higher than their natural floating value, the number of sidecoins would be small, severely reducing the liquidity of the sidcoin, therefore reducing the usefulness. They probably can not exist.

The problem is the same with national fiat pegs. When the floating value diverges too much from the peg, the peg has to be abandoned, or changed, else the side-fiat will be abandoned in hyperinflation.


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November 01, 2014, 08:55:44 PM
 #15230


we already know from your paper that there will be at least a delay due to the contest/confirmation time.  also, the SPV proof is untested, unless you want to claim it's perfect right here and now, which would be foolish.  these factors alone will ensure that there is a difference btwn the BTC and scBTC.

You first must burn bitcoins into SC.

So if you burn 10M of 13M BTC then the rest 3M BTC will increase in scarcity drastically. (3.25 times more scarce)
Then if  scBTC will become worthless and tokens inaccessible then all value(market cap, not tokens) will be returned to BTC.

THAT will definitely not happen.  otherwise, the scBTC will be transferred back to BTC almost immediately.  or in fact, they would never move at all.  

let me put it in simple terms w/o numbers.

you're taking a chunk of coin off a very secure ledger and moving them over to a less secure ledger.  it's to be expected those coins moved will be worth less b/c they are now less secure.  

b/c of arbitrage, you can expect the moved coin to drag down the price of the not moved coin to a lower equilibrium.

So SC can only transfer same amount of bitcoins back to MC. => BTC will have same value/scarcity or higher(if there is an irreversible bug on SC).
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November 01, 2014, 08:59:23 PM
 #15231

i think the conceptual problem many are having here is that they're tying the fiat value of scBTC to BTC b/c all they can think of is this risk free put or 2wp.  that is incorrect.

the value of the scBTC, in fiat terms, is dependent on the security of the sidechain upon which they are riding at the time, which by definition we know is less secure and has different economic properties.  it may only have 50% of the Bitcoin network hashing power from MM.

trying to say a new, untested "innovation" will exactly offset the discount the market will apply b/c of less security is naive.  that might only be true over a given time period during which that innovation is tested.

on top of all this, this discussion is naive in that it ignores economic manipulation or speculation.  even speculative attacks as i have already outline.  

the peg itself takes at least 2d to contest/confirm.  as we all know, the price of BTC can fluctuate 10% in a day and i'm sure the fiat value of the scBTC will do so as well.  the prices won't be correlated 1:1 at all times as one would have to assume perfect efficiencies/arbing in market trading which almost certainly never happens.
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November 01, 2014, 09:06:20 PM
 #15232

No emerging SC market will have higher liquidity than the BTC markets. If there is little friction to converting BTC <> SC, then the preferable way will be to convert and sell on the BTCUSD markets, and this can only be done so many times. And of course, converting BTC > SC would serve to make Bitcoin more scarce.
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November 01, 2014, 09:10:34 PM
 #15233

No emerging SC market will have higher liquidity than the BTC markets. If there is little friction to converting BTC <> SC, then the preferable way will be to convert and sell on the BTCUSD markets, and this can only be done so many times. And of course, converting BTC > SC would serve to make Bitcoin more scarce.

if you read my simplified version earlier, i think the market will price Bitcoin + SC's in aggregate, not each independently.  what you're doing in essence is moving a bunch of high valued BTC's over to a less secure SC resulting in a lower initial value for scBTC which will then be arbitraged away by pulling down the BTC price to a lower equilibrium.  the "innovation" cannot be depended on initially to offset this dynamic b/c it is unproven.
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November 01, 2014, 09:14:37 PM
 #15234

i think the conceptual problem many are having here is that they're tying the fiat value of scBTC to BTC b/c all they can think of is this risk free put or 2wp.  that is incorrect.

the value of the scBTC, in fiat terms, is dependent on the security of the sidechain upon which they are riding at the time, which by definition we know is less secure and has different economic properties.  it may only have 50% of the Bitcoin network hashing power from MM.

trying to say a new, untested "innovation" will exactly offset the discount the market will apply b/c of less security is naive.  that might only be true over a given time period during which that innovation is tested.

on top of all this, this discussion is naive in that it ignores economic manipulation or speculation.  even speculative attacks as i have already outline.  

the peg itself takes at least 2d to contest/confirm.  as we all know, the price of BTC can fluctuate 10% in a day and i'm sure the fiat value of the scBTC will do so as well.  it won't be 1:1 at all times as one would have to assume perfect efficiencies/arbing in market trading which almost certainly never happens.

But all this can only increase BTC value. We can create bitcoin features SC
a) send me $X USD and your scBTC/BTC address and then  I'll create transaction than you can withdraw Y BTC next month ... bitcoins are locked for some time
b) or I'll send some btc to your address and you are free to withdraw ... after this period expired (you did not withdrawn) I own private key :-)

Edit:
now we can use 3D party (Bitfinex) but we can create sidechain where you can buy/sell feature contract (scBTC).

Edit2:
and it is too risky to add into main bitcoin protocol
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November 01, 2014, 09:21:58 PM
 #15235

No emerging SC market will have higher liquidity than the BTC markets. If there is little friction to converting BTC <> SC, then the preferable way will be to convert and sell on the BTCUSD markets, and this can only be done so many times. And of course, converting BTC > SC would serve to make Bitcoin more scarce.

if you read my simplified version earlier, i think the market will price Bitcoin + SC's in aggregate, not each independently.  what you're doing in essence is moving a bunch of high valued BTC's over to a less secure SC resulting in a lower initial value for scBTC which will then be arbitraged away by pulling down the BTC price to a lower equilibrium.  the "innovation" cannot be depended on initially to offset this dynamic b/c it is unproven.
Yet if you are right, then few will wish to convert their SC to BTC if they see that they're purely burning their money.

I just don't think this is anything to be worried about at all.
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November 01, 2014, 09:25:14 PM
 #15236

i think the conceptual problem many are having here is that they're tying the fiat value of scBTC to BTC b/c all they can think of is this risk free put or 2wp.  that is incorrect.

the value of the scBTC, in fiat terms, is dependent on the security of the sidechain upon which they are riding at the time, which by definition we know is less secure and has different economic properties.  it may only have 50% of the Bitcoin network hashing power from MM.

trying to say a new, untested "innovation" will exactly offset the discount the market will apply b/c of less security is naive.  that might only be true over a given time period during which that innovation is tested.

on top of all this, this discussion is naive in that it ignores economic manipulation or speculation.  even speculative attacks as i have already outline.  

the peg itself takes at least 2d to contest/confirm.  as we all know, the price of BTC can fluctuate 10% in a day and i'm sure the fiat value of the scBTC will do so as well.  it won't be 1:1 at all times as one would have to assume perfect efficiencies/arbing in market trading which almost certainly never happens.

But all this can only increase BTC value.

naive  Roll Eyes  look at the stagnating price now.  it should be going up with all the good news over last 7 mo.

Quote
We can create bitcoin features SC
sure.  something i haven't heard addressed is how will the success or failure of the innovation be determined?  brg444 said an increase in scBTC or an increase in price would be indication for him.  c'mon.  price is the only one factor to measure.  how do the devs plan to measure success in a price volatile situation which we can certainly expect just like we see in Bitcoin?

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November 01, 2014, 09:26:48 PM
 #15237

if they see that they're purely burning their money.



explain
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November 01, 2014, 09:29:32 PM
 #15238

Well, the SCs would have reduced purchasing power. If they want their purchasing power back, they have to convert back. And like I said before, if it is easy enough to convert back, it sure beats dealing with some new and illiquid scamcoin exchanges.

I was worried initially reading your posts, but I actually like the idea of this two way peg. My opinion remains that the market will inevitably price them very closely to the Bitcoin price because the force of arbitrage is a stronger and more continuous pressure than the realization that Bitcoin is safer. And regardless, the volume will probably be negligible anyway.
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November 01, 2014, 09:31:11 PM
 #15239

naive  Roll Eyes  look at the stagnating price now.  it should be going up with all the good news over last 7 mo.

Seems, you are out of reality ($320).  We had $6 USD/BTC  2 years ago and $190 1 year ago.
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November 01, 2014, 09:38:27 PM
 #15240

Well, the SCs would have reduced purchasing power. If they want their purchasing power back, they have to convert back. And like I said before, if it is easy enough to convert back, it sure beats dealing with some new and illiquid scamcoin exchanges.

no, you're missing the time element.

initially, when a SC is first established, trading prices in fiat for scBTC will be lower b/c they are riding on a less secure sidechain..  we can expect this b/c of newness, less security from MM, possible failure, unproven innovation.  as time goes on, and as arb bots can be confident that the SC is relatively stable and they won't lose any scBTC that they buy in arbing from a SC failure, they will enter the market to buy up scBTC (price rises) while at the same time selling BTC (price drops) until they create a new equilibrium price for both which will closely match each other but result in a lower price for BTC.  multiply this by a 1000x SC's.

it's kinda like the one's closest to the Fed when it first release QE into the fiat system and it's value is highest until its inflationary effects spread throughout the system. only this is in reverse.
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