Gold collapsing. Bitcoin UP.

[brg444]

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

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

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

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

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

A better scBTC code will be open for everyone to review the moment it is commited to a SC

Pieter Wuille, bitcoin core developer
What we hope to accomplish is allow more innovation in the Bitcoin ecosystem, without needing a different currency.

If anyone premines (or otherwise inflates, even after the creation) coins on a sidechain, it would need to be encoded in the sidechain's rules. It seems unlikely people would move their assets to such a sidechain, and likely that even if there were benefits to using that sidechain, someone would simply fork it to remove the undesirable inflation. So it seems rather pointless to even implement - we certainly aren't planning to.

Assuming someone does come up with a scBTC that is so evidently superior it could precipitate a mass exodus off the parent BTC chain they will most certainly end up creating an actual altcoin using their chain as the parent chain.

This is because this new chain can only achieve Bitcoin's chain security if all nodes and hashing power switch over. A sidechain is inherently less secure than the parent, BTC blockchain.

This, I believe also nullifies your concern of mining pool "hijacking" transplants.

To entertain your scenario the network then would be left with two options to consider. Remember Good Money drives out Bad Money :

1) The hypothetic Blockstream "pre-mined" altcoin
2) The community fork of the exact same altcoin with fairer distribution (hint : 1:1 peg)

Remember that a Bitcoin-like first mover advantage is inexistent in that case because of the open source development.

Merge mining is a perfectly normal process and it can be extremely beneficial. Providing (almost) the same network security of BTC to altchains is a valuable and noteworthy contribution to their own development. What you seem to forget is that does not benefit them with the same network effect.

Name me one altcoin that people would undoubtedly switch over to if it profited from Bitcoin's network security?

I have spent some time reading the Reddit AMA and I'm sorry to say but it was disappointing to witness the childish stubbordness in your numerous comment in the face of considerably knowledgeable adversity. Your back must be aching from all this heavy lifting cause there were some serious moving of the goal post. You were corrected many time for different false assumption that you keep spreading around on this forum which I consider very concerning misinformation.

The Blockstream team has made it CLEAR they have NO interest into alternative currencies built on a sidechain. This is absolutely not their vision of sidechain and it is explained repeatedly in the white paper.

Adam Back
sidechains are a generic extension mechanism. we hope many people make use of the sidechain extension mechanism to add innovative new features centered around the bitcoin currency.

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[Melbustus]

...
(*) latency is at least as big of a potential threat.

Never underestimate the bandwidth of a station wagon full of tapes hurtling down the highway.

—Tanenbaum, Andrew S. (1989). Computer Networks. New Jersey: Prentice-Hall. p. 57. ISBN 0-13-166836-6.

Love that quote. That textbook was required reading in college.

Ethernet just celebrated its 40th birthday and its history is arguably a better analog for bitcoin and the alts than say myspace versus facebook.

Yes, agreed. Whenever someone says to me: "What if bitcoin is the next Myspace?" I happily explain to them that tcp/ip/http/smtp are all better analogies. Ethernet works too.

It was up against Big Blue's token ring and IBM was the Fed of the computer industry at the time. IBM even commissioned professors to write papers suggesting that ethernet wasn't feasible for commercial use, but happily ethernet eventually won over and it marked the first major kick in the nuts for IBM's influence and hegemony (Microsoft and Compaq later took out further chunks). Ethernet was also a decentralized architecture and beyond interacting with the layers below and above it, it didn't care much about anything. It just provided a solid and pervasive framework. Open source didn't really exist back then and ethernet was licensed but it was much cheaper than token ring. The major reason ethernet prevailed was because it was up against only IBM and there wasn't much else in the way of noise. In a way, I think Bitcoin could have benefitted from a more restrictive licensing agreement, whilst still remaining open source. Sidechain developments may indeed be complementary but the alts are mostly an expensive and divisive distraction imo, even though there are some very promising ideas.  

Ah, Token-ring. My first summer jobs as a teenager involved ripping that out of many walls and ceilings and installing Cat-3 ethernet cable instead.

[smooth]

I'm in justusranvier's camp on this one. Not raising blocksize, *at least* roughly allowing for Moore's Law, seems insane, and would just drive some alt to gain significant marketshare.

Bandwidth doesn't increase according to Moore's.
At best, Neilson's
http://www.nngroup.com/articles/law-of-bandwidth/

Your source says "10% less than Moore's law." That's not really much difference. Still a lot and still exponential, for now.

[smooth]

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

People would certainly buy BTC if scBTC were worth more, but only at something less than the scBTC value in order to convert it and make a profit. There would be no reason to convert back

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

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

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

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

I never said the price goes to zoro. The price would be approximately the same as scBTC, obviously, since you can convert. There would just be no reason to hold BTC. If scBTC offers some advantage to enough people, you might as well convert it.

[Melbustus]

I'm in justusranvier's camp on this one. Not raising blocksize, *at least* roughly allowing for Moore's Law, seems insane, and would just drive some alt to gain significant marketshare.

Bandwidth doesn't increase according to Moore's.
At best, Neilson's
http://www.nngroup.com/articles/law-of-bandwidth/

Your source says "10% less than Moore's law." That's not really much difference. Still a lot and still exponential, for now.

Yeah, indeed. Gavin quoted Nielson's as 50%/yr in his scalability roadmap post. Works out to pretty close to Moore's doubling every 18months. I think the error surrounding the assumptions these "laws" fundamentally make likely dwarfs whatever difference there is between Moore and Nielson growth rates anyways.

[brg444]

The former: After time N for the whole chain, global exchange rate goes to 1 BTC = 0 Sidecoin. I see nothing preventing the exchange rate function from being able to be specified this way.

So a one-way peg with limited supply

I don't see this type of scheme gaining much traction at all so I see no value in entertaining this proposition.

[brg444]

I never said the price goes to zoro. The price would be approximately the same as scBTC, obviously, since you can convert. There would just be no reason to hold BTC. If scBTC offers some advantage to enough people, you might as well convert it.

which is why scBTC is better implemented as an altcoin.

if you have the network and the miners on your side what's stopping you ?

[Melbustus]

The former: After time N for the whole chain, global exchange rate goes to 1 BTC = 0 Sidecoin. I see nothing preventing the exchange rate function from being able to be specified this way.

So a one-way peg with limited supply

I don't see this type of scheme gaining much traction at all so I see no value in entertaining this proposition.

Well, a two-way peg that degrades into a one way peg, but yeah, I agree it probably wouldn't gain much traction in the first place. It'll be interesting to see what sidechains start getting proposed and what their exchange rate functions look like. I expect they'll be pretty straight-forward.

[cbeast]

The Blockstream team has made it CLEAR they have NO interest into alternative currencies built on a sidechain. This is absolutely not their vision of sidechain and it is explained repeatedly in the white paper.

Adam Back
sidechains are a generic extension mechanism. we hope many people make use of the sidechain extension mechanism to add innovative new features centered around the bitcoin currency.

from the White Paper Appendix C

Atomic swaps
Once a sidechain is operational, it is possible for users to exchange coins atomically between chains,
without using the peg.

It sounds like altcoins to me.

[smooth]

I never said the price goes to zoro. The price would be approximately the same as scBTC, obviously, since you can convert. There would just be no reason to hold BTC. If scBTC offers some advantage to enough people, you might as well convert it.

which is why scBTC is better implemented as an altcoin.

if you have the network and the miners on your side what's stopping you ?

Since I don't really see much difference between altcoins and side chains other than how they are being marketed, I guess I agree with you.

[brg444]

The Blockstream team has made it CLEAR they have NO interest into alternative currencies built on a sidechain. This is absolutely not their vision of sidechain and it is explained repeatedly in the white paper.

Adam Back
sidechains are a generic extension mechanism. we hope many people make use of the sidechain extension mechanism to add innovative new features centered around the bitcoin currency.

from the White Paper Appendix C

Atomic swaps
Once a sidechain is operational, it is possible for users to exchange coins atomically between chains,
without using the peg.

It sounds like altcoins to me.

Yes of course it is possible to create "altcoins" or, commonly referred to in the paper, Issued Assets.

My point is the main innovation they are trying to put forward, if we can trust their writing, is using application specific features of altcoins without having to issue a new currency.

The altcoin approach of creating a new cryptocurrency just to introduce new features creates uncertainty for everyone looking at cryptocurrencies from the outside. There seems to be no natural stopping point, each fork can be forked again, ad infinitum. This creates both market and development fragmentation. We think that for cryptocurrencies to be successful as a whole we must build network effect, not fragmentation.

To accomplish this we propose technology to enable new cryptocurrency networks that do not need new cryptocurrencies

http://www.blockstream.com/2014/10/23/why-we-are-co-founders-of-blockstream/

The whole point of this exercise is to leverage Bitcoin's network effect and sound economic foundations while fostering innovation from within.

[brg444]

I never said the price goes to zoro. The price would be approximately the same as scBTC, obviously, since you can convert. There would just be no reason to hold BTC. If scBTC offers some advantage to enough people, you might as well convert it.

which is why scBTC is better implemented as an altcoin.

if you have the network and the miners on your side what's stopping you ?

Since I don't really see much difference between altcoins and side chains other than how they are being marketed, I guess I agree with you.

Have you read the "Applications" section of the white paper?

The first application, already mentioned many times, is simply creating altchains with coins that
derive their scarcity and supply from Bitcoin. By using a sidechain which carries bitcoins rather
than a completely new currency, one can avoid the thorny problems of initial distribution and
market vulnerability, as well as barriers to adoption for new users, who no longer need to locate
a trustworthy marketplace or invest in mining hardware to obtain altcoin assets.

It essentially allows for Bitcoin to be used on altcoin chains while able to move back and forth to the original, parent Bitcoin blockchain

[Hunyadi]

If the conflict of interest can be addressed clearly, the sidechains will be good for Bitcoin ecosystem and the exchange rate of it. Cryptocurrency like Bitcoin will need its own infrastructure for trading and debt proof and share proof to circumvent the legal restriction from government without trusting too many 3rd exchange service.  The better infrastructure will make Bitcoin more usefully money, which is a better money.

I agree. Also, I think if bitcoin doesn't adopt sidechains perhaps litecoin will. After that, litecoin would be IMO the main crypto.

[NewLiberty]

I'm in justusranvier's camp on this one. Not raising blocksize, *at least* roughly allowing for Moore's Law, seems insane, and would just drive some alt to gain significant marketshare.

Bandwidth doesn't increase according to Moore's.
At best, Neilson's
http://www.nngroup.com/articles/law-of-bandwidth/

Your source says "10% less than Moore's law." That's not really much difference. Still a lot and still exponential, for now.

Right, That is just the first of many criticisms I have of the current proposals.  
I don't like extrapolations used for predictive purposes.
They assume too much.
I'd prefer a method of rightsizing max block size through use of the data of the future which may be derived from the block chain through sums of fees or block size.
This can be done much in the same way that difficulty is generated.
The risks of doing it in this better way may be that it could create some perverse incentives for folks that wanted to "game" the metric.
I'd like to see a proposal that doesn't come with what amounts to a guarantee that it will be wrong because it relies on a guess made years ago.

[Dusty]

if i were setting up a SC, i'd just fork Bitcoin, add an anonymity function, then let it run.  there'd be a good chance i could get a full on rush into my SC.

And since the SC is two-way pegged, that would be great.

In fact, I hope this will be one of the first SC ever made, that would be the right way to add an anonymization layer onto bitcoin. I tried to setup something similar in the past but I could not solve all the details that the paper instead correctly addresses.

Ultimately, SC are what will completely destroy all altcoins and will give more and more value to Bitcoin, exactly because to the hard-pegging of the currency: what happens now is that for each new scamcoin that is launched every bitcoin holder must choose if part some of his bitcoin stash to buy some of the new coins because they may become more useful and hence more valuable of bitcoin in the future.

But with sidechains there is not such dilemma: since a well defined protocol to switch coins to/from every SC is in place I can wait to enter the SC only when, and if, the thing is useful for me, and not a moment before (and with the possibility to come back, too).

With sidechains we can hope that a new one will be highly successful without the fear that we have not bought his coins in time, because we already have them (of course supposing we are invested in bitcoin), and for all of them (all of the sidecoins that will ever be made).

So, people like Satoshi, Cypherdoc and other highly invested in Bitcoin should be very, very grateful for sidechains because that's the best opportunity we have to maintain the relevance of bitcoin (and hence his value) in the future.

[smooth]

Ultimately, SC are what will completely destroy all altcoins and will give more and more value to Bitcoin, exactly because to the hard-pegging of the currency: what happens now is that for each new scamcoin that is launched every bitcoin holder must choose if part some of his bitcoin stash to buy some of the new coins because they may become more useful and hence more valuable of bitcoin in the future.

Oh come on. Alts in the aggregate are only 10% of Bitcoin's value, and the biggest alt has no innovative features at all. It clearly exists for some completely different reason other than that addressed by side chains and therefore is unlikely to be affected.

This obsession with alts is very unhealthy and unhelpful. Focus on the value that sidechains (or anything else) could potentially add to Bitcoin by allowing faster and safer development. There is a lot more than 10% to be gained there.

[solex]

Ultimately, SC are what will completely destroy all altcoins and will give more and more value to Bitcoin, exactly because to the hard-pegging of the currency: what happens now is that for each new scamcoin that is launched every bitcoin holder must choose if part some of his bitcoin stash to buy some of the new coins because they may become more useful and hence more valuable of bitcoin in the future.

Oh come on. Alts in the aggregate are only 10% of Bitcoin's value, and the biggest alt has no innovative features at all. It clearly exists for some completely different reason other than that addressed by side chains and therefore is unlikely to be affected.

This obsession with alts is very unhealthy and unhelpful. Focus on the value that sidechains (or anything else) could potentially add to Bitcoin by allowing faster and safer development. There is a lot more than 10% to be gained there.

That 10% was 5% for a long time, until recent months. So alts are gaining ground. Bitcoin needs the enhanced features SC promises, but importantly, scope for scalability as well.

[cbeast]

SC won't solve Bitcoin's scalability because they will optimize spamming Bitcoin for metadata. We'll be right back to the block size argument again. In fact, they will make it happen much faster.

[sickpig]

Ultimately, SC are what will completely destroy all altcoins and will give more and more value to Bitcoin, exactly because to the hard-pegging of the currency: what happens now is that for each new scamcoin that is launched every bitcoin holder must choose if part some of his bitcoin stash to buy some of the new coins because they may become more useful and hence more valuable of bitcoin in the future.

Oh come on. Alts in the aggregate are only 10% of Bitcoin's value, and the biggest alt has no innovative features at all. It clearly exists for some completely different reason other than that addressed by side chains and therefore is unlikely to be affected.

This obsession with alts is very unhealthy and unhelpful. Focus on the value that sidechains (or anything else) could potentially add to Bitcoin by allowing faster and safer development. There is a lot more than 10% to be gained there.

That 10% was 5% for a long time, until recent months. So alts are gaining ground. Bitcoin needs the enhanced features SC promises, but importantly, scope for scalability as well.

just for add a few more data points:

[smooth]

Ultimately, SC are what will completely destroy all altcoins and will give more and more value to Bitcoin, exactly because to the hard-pegging of the currency: what happens now is that for each new scamcoin that is launched every bitcoin holder must choose if part some of his bitcoin stash to buy some of the new coins because they may become more useful and hence more valuable of bitcoin in the future.

Oh come on. Alts in the aggregate are only 10% of Bitcoin's value, and the biggest alt has no innovative features at all. It clearly exists for some completely different reason other than that addressed by side chains and therefore is unlikely to be affected.

This obsession with alts is very unhealthy and unhelpful. Focus on the value that sidechains (or anything else) could potentially add to Bitcoin by allowing faster and safer development. There is a lot more than 10% to be gained there.

That 10% was 5% for a long time, until recent months. So alts are gaining ground. Bitcoin needs the enhanced features SC promises, but importantly, scope for scalability as well.

I'm not sure what time frame you are using. At one point it was 0%, so certainly on that basis they are gaining, in some sense.

Ignoring the extreme peak in late 2013, for several months over the past year BTC was roughly $8 billion and LTC was $300-400m, which makes LTC almost 5% by itself.

I'd like to see those numbers though.

My intuition is that the opposite has happened, that alts are slowly losing ground, at least over the past year or so. I can't believe anything close to a doubling of share has happened in recent history.

EDIT: I see from the graph in a subsequent post that my intuition was correct. It isn't entirely up to date but shows alts at 4%. It's really quite silly for that to motivate anything at all about Bitcoin development. For sidechains to be a good idea they had better be a good idea independent of alts.