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Author Topic: Gold collapsing. Bitcoin UP.  (Read 1978436 times)
cypherdoc
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November 20, 2014, 05:45:12 PM
 #17721

One supposed "weakness" of colored coins (I use the quotes because I personally see it as a strength), is that the bitcoin protocol doesn't verify the "amount" of colored coins transferred.  I can inspect any bitcoin output, look at its "value" field," and, provided that that TX has been mined into a block, I know that the output really contains the stated number of bitcoins.  With colored coins, this property does not exist; instead I must follow the chain of colored transactions back to the original issuance of the colored asset to determine if the (e.g.) 1,000,000 stock certificates I'm about to buy is actually valid.  This means that SPV nodes cannot verify transactions and that the whole transaction chain cannot be pruned.  
  

thanks. i've always wondered about this.
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November 20, 2014, 05:53:13 PM
 #17722

Nice Bloomberg panel of  guys who "get" that you can't be splitting the unit from  the Blockchain;

http://mobile.bloomberg.com/video/bitcoin-as-a-technology-bloomberg-panel-TnFJvX9~SOOgqr4UoiWRHw.html

Everyone here "gets" it.

This is absolutely not the argument we are having.

When they say "you can't separate" the two, that's absolutely not in reference to sidechains or other similar schemes.

In fact, you can bet these guys are pretty excited about sidechains.


Quote from: Sidechains white paper
In this paper, we argue that it is possible to simultaneously achieve these seemingly contradictory goals. The core observation is that
“Bitcoin” the blockchain is conceptually independent from “bitcoin” the asset

I was referring to the meme the guys in the video were addressing. 

this is what we are discussing, just in case you thought it wasn't.

When are you going to address the fact that any centralized off-chain solution is considerably more dangerous to Bitcoin as Money than sidechains are?

You are the only one making that claim, you should address it.

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November 20, 2014, 05:53:27 PM
 #17723

...
In the meantime, there's already the potential for enormous growth ahead of us with bitcoin as it is.

I agree, but only when 'as it is' means absent the hard-fork needed to induce unhealthy growth which will drive the solution under control of centralized and almost certainly corporate interests.

Even at the current broadly supportable transaction rates there is still a very significant looming threat of non-fungibility attacks (aka 'tainting' and associated 'bitcoin license' requirements.)  Whether defenses against such attacks could be effective with the realistic possibility of massive decentralization of support infrastructure, I do not know.  I'm certain that it will be all over for Bitcoin if/when such attacks are mounted if by that time Bitcoin is significantly popularized and centralized though.


cypherdoc
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November 20, 2014, 05:53:32 PM
 #17724

sorry, but i don't agree with his assessment.  precisely b/c it leaves out an understanding that the money function will get deprecated in deference to the speculative assets riding on the SC's which distract from the mechanism which has brought us to where we are today.  the BTC price will drop if SC's are implemented, imo.

If by mechanism you mean mining I can see the possibility of harm and I've generally been on board with the trepidation on that front. But simply having stocks or whatever denominated in Bitcoin ledger units (whether actual bitcoins or perfect you-can-never-lose-the-2wp sidechain coins) seems fine since that's part of what money/ledger is supposed to do. I don't know that it's necessary for people to understand sound money in order to benefit from it, as long as it does take over. Anyway, if the pile on the right in the pic you've been posting (money, store of value, Forex) is way bigger than speculative assets, how can such distraction really happen?

is it what Bitcoins ledger was designed to do?  this is why i put this post up earlier.  granted, it doesn't say it WASN'T designed to do it either but my point is that we risk everything if we're wrong:

i'm glad everyone's been talking about Satoshi recently.  that stimulated me to go back thru his whitepaper to see if there were any references to any of the speculative SC's functions that are being proposed by the SC proponents in this thread and elsewhere.  those being listed below.  they claim that SC's are a "natural and logical extension" to Bitcoin and that if Satoshi was able to be asked, he would love SC's.  well, i see no indication that this wild claim is valid.  see that none of these speculative assets were ever mentioned:

0 asset
0 stocks
0 bonds
0 insurance
0 smart
0 contracts
0 sidechain
0 offchain
0 separate
2 gold
5 money

it's clear to me that Satoshi intended for Bitcoin to be a new form of digital money, or currency if you will, that mimicked gold in all respects and improved upon it.  i'm only aware of one isolated forum post where he mentioned the addition of smart contracts, etc but that was in the context of adding them to the MC protocol.  never was there any mention of SC's nor the quack idea of separating the BTC units from the blockchain.  and understandably so.  by breaking the inextricable link btwn the two, you break security and therefore break Bitcoin as Money.  this is so obvious.  the last 200 pages have clearly demonstrated a myriad of ways things can go wrong with the SC proponents morphing their vision of how SC's will play out to satisfy any specific concern while promising us the moon.

Bitcoin should continue to focus on what got us to where we are:  the Money function.  that is where the problem lies today in the world of fiat and central banks.  this is what i saw back in January of 2011, Bitcoin as a poison dart aimed at the heart of central banks.  the problem is not stocks, bonds, insurance, contracts.  those all function reasonably well.  the problems we've had with them in the past, such as in 2001 and 2008, were fiat printing enabled and backed by central banks.  w/o the ability to print at will to bail out bad actors, Bitcoin as Money seeks to clamp down and eliminate this moral hazard.  and the network of money is ripe to be disrupted.  and rightfully so.  THAT is where the money is.  the Forex is the biggest in the world as i've shown.  the gold market is huge as well.  if Bitcoin can crack those markets we will go to the Moon.  Bitcoin should stay simple and non complex.  it has evolved to that of a public good.  no one should be allowed to corrupt its primary function of money.  let alone profit off it.  

leave the source code alone.
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November 20, 2014, 05:56:14 PM
 #17725

Also, I disagree that the price of nxt is the most important thing to be looking at anyway:

http://i.imgur.com/ax6r5OE.png
http://i.imgur.com/4fbiF5b.png

It's all about the projects being built on top of the platform.
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November 20, 2014, 05:57:06 PM
 #17726

I am wary of sidechains because of the mining incentive issue. Moving transactions off-chain leaves miners underfunded in the far future, or else results in very high tx fees, leaving Bitcoin more open to competition from a more inflationary coin that pays miners through block rewards more and tx fees less.

However, on that note I have to admit there is little substantive difference between sufficiently high tx fees and slightly breaking the 21M coin limit (no halving, or slower halving), since you can't actually benefit from your Bitcoin wealth unless you spend it eventually, at which time if you incur a big tx fee as a tax it is no different to you than an inflation tax. OK, maybe certain people will gain/lose more from high tx fees vs. inflation. Nevertheless, one way or another the miners have to get paid, and if Bitcoin is severely under-mined due to SC then one of those two things will eventually happen, or else Bitcoin (the platform) will die.

I agree with the rest of your post but I have issues with this notion here.

From my point of view. SPVP Sidechains that enable merged-mining are in fact bringing balance to this issue of transaction fees emigrating to different, off-chain schemes.

So far the only option to accomodate transactions types that are not implementable in the mainchain had been these off-chain schemes that effectively present this very danger of moving transactions off-chain and out of reach of potentially underfunded miners.

SPVP Sidechains will not negate this aspect but they introduce an alternative for the market. The likely outcome is that any chain that gain significant adoption from the market and therefore require the "ultimate" security model will be picked up by miners and that way these transactions will not "escape" them.



"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
Adrian-x
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November 20, 2014, 06:01:07 PM
 #17727

I agree with you on this issue cypher but my problem is... If you don't want these side chains to exist, why is it that you are also so against alt coins that enable features that you do not wish Bitcoin to support?

Great read:
https://blog.ethereum.org/2014/11/20/bitcoin-maximalism-currency-platform-network-effects/

How would you like to see such innovation occur?


cypher is also human, not wanting to speak for cypher, but my take on it and his attack on smoothy is hes saying they are a waste, and dont invest in them. I didn't read that there should be no competition, just an argument that they won't be competition. I disagreed with him then but its a non issue because investing BTC in Alts just makes the ecosystem stronger.  

to be honest, I love the competition, its awesome, it makes Bitcoin more valuable, and one can invest in them profitably if one is an active trader, (me I'm not so good, but i have made a profit only because there is some genuine innovation and community in that space.)

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November 20, 2014, 06:05:33 PM
 #17728

Sounds to me if our fight for bitcoin is to stop Ethereum all together and support Counterparty and Sidechains

https://blog.ethereum.org/2014/11/20/bitcoin-maximalism-currency-platform-network-effects/

First, an introduction to the technical strategies at hand. In general, there are three approaches to creating a new crypto protocol:

    Build on Bitcoin the blockchain, but not Bitcoin the currency (metacoins, eg. most features of Counterparty)
    Build on Bitcoin the currency, but not Bitcoin the blockchain (sidechains)
    Create a completely standalone platform

When discussing currency network effects, he completely missed the big one: the network effect of the ledger. He talked about network effects of currency, but not about store of value.

This whole Bitcoin thing has been about getting yourself on the universal ledger of civilization. That is why people invest. That is why people support it. That is why it's a big deal. Yet it's like he has no idea that is even a thing. He's fallen for the subtle confusion that Bitcoin is a "currency," when the reality is that Bitcoin avoids the need for currency in the first place since it's a direct ledger.

The closest he came is this part:

Quote
Unit of account network effect (very large currencies become units of account, leading to more purchasing power stability via price stickiness as well as higher salience) – unfortunately, Bitcoin will likely never be stable enough to trigger this effect; the best empirical evidence we can see for this is likely the valuation history of gold.

But this isn't really the same thing as store of value - the idea that arises in society that "we will use this ledger (or a commodity substitute) to keep track of debts from now on, by convention."

This is why the ledger concept really has to be understood, and understood on the deepest level, to avoid falling into silliness of various kinds. It's impossible to fully understand Bitcoin if you continue to think of it at as a currency rather than as a ledger, and this is just one more example.
+1

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November 20, 2014, 06:05:38 PM
 #17729

Is colored coins not introducing an additional layer of trust?
That depends on how you define "another layer of trust".

Colored coins are inherently used for tracking things outside the blockchain - that by definition means representing obligations a.k.a counterparty risk. Any technique that tracks obligations outside the blockchain will be tracking counterparty risk.

But none of that has nothing to do with the underlying technology used to create the token. Colored coins as tokens are no different from other bitcoins. A colored coin token doesn't all of a sudden become less trustworthy than a non-colored Bitcoin.

I define "another layer of trust" as trusting anything else but the Bitcoin network.

In that regard colored coins are less decentralized than sidechains.

There's nothing "centralized" about the colored-coin protocol, and any additional "layer of trust" that exists for the colored-coin asset would exist for the same asset stored on a sidechain.  For example, if the asset represents 1 oz of gold stored in my personal vault, then you're trusting me regardless of whether I issue the gold receipt as a colored coin or as a sidechain token.

One supposed "weakness" of colored coins (I use the quotes because I personally see it as a strength), is that the bitcoin protocol doesn't verify the "amount" of colored coins transferred.  I can inspect any bitcoin output, look at its "value" field," and, provided that that TX has been mined into a block, I know that the output really contains the stated number of bitcoins.  With colored coins, this property does not exist; instead I must follow the chain of colored transactions back to the original issuance of the colored asset to determine if the (e.g.) 1,000,000 stock certificates I'm about to buy is actually valid.  This means that SPV nodes cannot verify transactions and that the whole transaction chain cannot be pruned.  

And so transactions are verified through a process external to the Bitcoin system, right? Hence my statement that there is an additional layer of trust.

"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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November 20, 2014, 06:07:13 PM
 #17730

SC's carrying speculative asset will be different and separate ledgers to Bitcoin.  attaching these less secure ledgers to Bitcoin will devalue the entire system.  remember that the Bitcoin miners will probably only be able to MM a couple of the thousands of speculative SC's that will be bolted onto Bitcoin.

How exactly are we defining the term "ledger" here? It seems that whatever percentage of what we now call the Bitcoin ledger that happens to be currently on a sidechain (assuming perfect 2wp forever and a perfectly secure SC) is simply being updated by that sidechain. That is, it is temporarily being maintained/updated by the sidechain platform rather than the Bitcoin platform, but the ledger itself ("who owns what") should conceptually be thought of as completely intact (insofar as the sidechain and 2wp remain sound, which was the starting assumption).

If you own 210,000 BTC, meaning 1% of the ledger (now known as the Bitcoin ledger, later to simply be known as "the ledger"), under these assumptions you continue to own 1% of the ledger no matter what sidechain you happen to be have your ledger stake being updated by at the moment.

Now certainly the "perfect 2wp" and "perfectly secure SC" assumptions are not at all a given. But insofar as they are, the ledger does seem to remain perfectly intact under such sidechains. Therefore, it seems to me that the argument against sidechains should focus on why these assumptions are not likely to be met (mining issues), which is a situation that will mess with the ledger (though only if people get duped into putting too much money into SCs).
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November 20, 2014, 06:07:43 PM
 #17731

...
This is why the ledger concept really has to be understood, and understood on the deepest level, to avoid falling into silliness of various kinds.
the integrity of the ledger depends on the currency unit riding on it.  the greed to obtain the unit is what drives the mining incentive.  w/o the unit, the ledger dies.

that's were I am at too.

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November 20, 2014, 06:15:46 PM
 #17732


I was referring to the meme the guys in the video were addressing. 

this is what we are discussing, just in case you thought it wasn't.

No, the meme in the video is why not run USD on the blockchain technology. They answer assumptions that the currency unit does not need to be native to the blockchain and can in fact be spared. That is far from what we are discussing

You are the only one making that claim, you should address it.

 Huh

This seems pretty self-explanatory to me but if you insist, I can refer to several of my posts that do adress this :

Quote
You propose that exchanges or any off-scheme schemes running on a fractional reserve is not a direct threat to Bitcoin's sound money function but only a "reputation" problem?

Is it not true that offchain solutions are inherently more likely to run on a fractional reserve than a sidechain where the scarcity is enforced on the protocol level (mathematically) ?

Maybe you want to argue this? Of course you don't since I have addressed these exact concerns in answer to your questioning a couple of pages ago and you never bothered replying or counter-arguing.

In fact you also have yet to answer this one

I totally believe that BlockStream's business as it standards will depend on that fact.

There is a risk of destroying Bitcoin as we know it if BlockStream's goal is achieved.

So I understand you are also against federated sidechains? Because they also create this exact seperation you are against.
[/quote]

"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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November 20, 2014, 06:18:22 PM
 #17733

sorry, but i don't agree with his assessment.  precisely b/c it leaves out an understanding that the money function will get deprecated in deference to the speculative assets riding on the SC's which distract from the mechanism which has brought us to where we are today.  the BTC price will drop if SC's are implemented, imo.

If by mechanism you mean mining I can see the possibility of harm and I've generally been on board with the trepidation on that front. But simply having stocks or whatever denominated in Bitcoin ledger units (whether actual bitcoins or perfect you-can-never-lose-the-2wp sidechain coins) seems fine since that's part of what money/ledger is supposed to do. I don't know that it's necessary for people to understand sound money in order to benefit from it, as long as it does take over. Anyway, if the pile on the right in the pic you've been posting (money, store of value, Forex) is way bigger than speculative assets, how can such distraction really happen?

is it what Bitcoins ledger was designed to do?  this is why i put this post up earlier.  granted, it doesn't say it WASN'T designed to do it either but my point is that we risk everything if we're wrong:

Are you mainly saying that the incentive structures for mining change in unpredictable ways if speculative assets are built straight into the money itself, rather than those assets simply being denominated in the money, like how the DOW is denominated in dollars? If that's what you're saying, I might agree. I'm not sure I see any problem with the incentives, but I also can't rule out a problem. The precautionary principle. This would extend to things like Counterparty, yes?

Wait, I'm pretty sure you said before that it's fine for things to be built on top of Bitcoin. So I'm confused about whether your argument here is just an extension of your "Bitcoin will only ever be used as money" thesis or whether it's specific to sidechains due to merge mining or for some other reason.
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November 20, 2014, 06:22:26 PM
 #17734

SC's carrying speculative asset will be different and separate ledgers to Bitcoin.  attaching these less secure ledgers to Bitcoin will devalue the entire system.  remember that the Bitcoin miners will probably only be able to MM a couple of the thousands of speculative SC's that will be bolted onto Bitcoin.

How exactly are we defining the term "ledger" here? It seems that whatever percentage of what we now call the Bitcoin ledger that happens to be currently on a sidechain (assuming perfect 2wp forever and a perfectly secure SC) is simply being updated by that sidechain. That is, it is temporarily being maintained/updated by the sidechain platform rather than the Bitcoin platform, but the ledger itself ("who owns what") should conceptually be thought of as completely intact (insofar as the sidechain and 2wp remain sound, which was the starting assumption).

If you own 210,000 BTC, meaning 1% of the ledger (now known as the Bitcoin ledger, later to simply be known as "the ledger"), under these assumptions you continue to own 1% of the ledger no matter what sidechain you happen to be have your ledger stake being updated by at the moment.

Now certainly the "perfect 2wp" and "perfectly secure SC" assumptions are not at all a given. But insofar as they are, the ledger does seem to remain perfectly intact under such sidechains. Therefore, it seems to me that the argument against sidechains should focus on why these assumptions are not likely to be met (mining issues), which is a situation that will mess with the ledger (though only if people get duped into putting too much money into SCs).

+1

I have referred to this situation as the ledger being distributed on multiple chains instead of sitting on a single one.

This notion has potentially positive implications for the preservation of the ledger : a single Blockchain is a single point of failure.

"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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November 20, 2014, 06:25:03 PM
 #17735

Therefore, it seems to me that the argument against sidechains should focus on why these assumptions are not likely to be met (mining issues), which is a situation that will mess with the ledger (though only if people get duped into putting too much money into SCs).

that's what i am trying to do.

i would also submit that a ledger that carries speculative assets (anything other than BTC) will be different ledgers as they will be less secure as they aren't likely to be MM and will be priced in the market differently. 
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November 20, 2014, 06:25:44 PM
 #17736

When they say "you can't separate" the two, that's absolutely not in reference to sidechains or other similar schemes.

Quote from: Sidechains white paper
In this paper, we argue that it is possible to simultaneously achieve these seemingly contradictory goals. The core observation is that
“Bitcoin” the blockchain is conceptually independent from “bitcoin” the asset

I totally believe that BlockStream's business as it standards will depend on that fact.

There is a risk of destroying Bitcoin as we know it if BlockStream's goal is achieved.

So I understand you are also against federated sidechains? Because they also create this exact seperation you are against.

it sounds like you are desperate, in all the noise you may have missed it.

Peter-R put it most succinctly - my emphasis in bold:

(continued) Furthermore, except for in this thread, there seems to be very little concern for the new dynamics that this change could entail.  I highly respect Greg Maxwell (gmaxwell) and Andrew Poelstra (andytoshi), and I want to mention that they're pretty quick to point out the need for rigour in any proposed crypto-system.  Andytoshi wrote what's become a highly-cited paper on the dangers of altcoins designed by "amateurs."  New designs should be peer-reviewed by experts in the field, tested, etc., etc., etc.

But SPVP sidechains are not just a new cryptosystem.  They represent a change to the economics, game theory, politics, and probably even legal aspects of bitcoin.  For the same reason that amateur cryptographers may be blind to the weaknesses of their proposed cryptosystems, professional cryptographers may be blind to the change in incentives that their new cryptosystem entails.  SPVP sidechains should not be viewed as simply a technical problem; it's a multidisciplinary problem and we need to explore the concerns raised through many different lenses.  

In the meantime, there's already the potential for enormous growth ahead of us with bitcoin as it is.

One argument I would like to make is I don't consider SPV to be a "feature" like blacklisting but moreso an "upgrade" on a scheme that is already possible within the existing Bitcoin protocol (federated peg can be implemented right now as you have pointed out).

I think it is clearly a new feature (not that that's necessarily a bad thing--one could argue that Pay2ScriptHash was a new feature too).  The fact that federated sidechains are already possible in no way means that adding OP_SIDECHAINPROOFVERIFY is an "upgrade." The federated servers sit on top of the bitcoin protocol, whereas the SPV-proof-based sidechains would be integrated within the protocol.  If you argue that SPV-sidechains would be an "upgrade," would you not also argue that native support for colored coins or Counterparty features would also be an "upgrade"?  Like federated sidechains, these features are already possible on platforms that sit on top of bitcoin too.  

brg444: Do you support a hard-fork to increase the max block size limit?

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November 20, 2014, 06:27:31 PM
 #17737

One supposed "weakness" of colored coins (I use the quotes because I personally see it as a strength), is that the bitcoin protocol doesn't verify the "amount" of colored coins transferred.  I can inspect any bitcoin output, look at its "value" field," and, provided that that TX has been mined into a block, I know that the output really contains the stated number of bitcoins.  With colored coins, this property does not exist; instead I must follow the chain of colored transactions back to the original issuance of the colored asset to determine if the (e.g.) 1,000,000 stock certificates I'm about to buy is actually valid.  This means that SPV nodes cannot verify transactions and that the whole transaction chain cannot be pruned.  

And so transactions are verified through a process external to the Bitcoin system, right? Hence my statement that there is an additional layer of trust.

I don't understand what you mean by "additional layer of trust" in the context that you're using it.  What I addressed above was just a technical issue of whether an SPV node can verify the colored coin transfer, or whether a node that stores the full chain of colored transactions is required. 

The additional layer of trust is the fact that there's a counter party to these colored assets (the issuer of stocks, bonds, gold receipts, etc.) and there's no protocol that can remedy that. 

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November 20, 2014, 06:28:34 PM
 #17738

Are you mainly saying that the incentive structures for mining change in unpredictable ways if speculative assets are built straight into the money itself, rather than those assets simply being denominated in the money, like how the DOW is denominated in dollars? If that's what you're saying, I might agree. I'm not sure I see any problem with the incentives, but I also can't rule out a problem. The precautionary principle. This would extend to things like Counterparty, yes?

Wait, I'm pretty sure you said before that it's fine for things to be built on top of Bitcoin. So I'm confused about whether your argument here is just an extension of your "Bitcoin will only ever be used as money" thesis or whether it's specific to sidechains due to merge mining or for some other reason.

yes, that's what i'm saying. the danger being that of building speculative asset trading directly into the protocol facilitated by a conflicted spvp.  i think it deprecates the money function we currently enjoy and introduces unacceptable risk.  and it certainly hasn't been proven to work.

and i am fine with things being built on top of Bitcoin as long as they bring value and compete fairly.
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November 20, 2014, 06:32:54 PM
 #17739

here's another hint at Satoshi's original intentions in targeting the money function only.  he titled the original Bitcoin thread thusly:

"Bitcoin p2p e-cash paper."

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November 20, 2014, 06:33:06 PM
 #17740

a single Blockchain is a single point of failure.

The problem from an investment perspective is that this requires active asset management, and if I choose the wrong chain to allocate some of my wealth to I lose when it fails (assuming the 2wp is also lost). I like spin-offs because if you have a 1% stake in the ledger now, you have a 1% stake in all the spin-offs as well (assuming spin-offs have the same inflation schedule as Bitcoin) by default, without having to do anything. No matter what chains win, your stake in the ledger is always and automatically preserved. With sidechains, you have to be a masterful investor to ensure net zero change to your stake in the total operational ledger.
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