Gold collapsing. Bitcoin UP.

[Melbustus]

The idea that alts "compete" with BTC is not supported by historical data.

Indeed, data so far suggests that new alts pretty much just compete with *other alts*. The alt-market has maintained 5-10% of bitcoin's market-cap for several years now.

If that were true you would expect hardly any correlation between BTC and alts, but a strong negative correlation between alts. But that is not what actually happens.

What exactly "is not what actually happens"? Alts have cumulatively been 5-10% of bitcoin's market-cap for years, or are you contesting this? The number of alts used to be <10. Now it's >400. Therefore, alts mostly compete with other alts for aggregate share of the crypto-pie...

Alti-alt sentiment in the Bitcoin community a harmful obsession and looks a lot like arrogance. It's that sort of attitude, in part, that encourages people to want to create distinct communities.

I'll refrain from fully re-iterating my prior commentary on this, but I'd like to note that it's not a harmful obsession if you believe there's a good chance my prior statements on the matter are true. Again, if bitcoin fails as the leader, the case for crypto-scarcity *as a whole* is severely damaged, and that includes alts.

That's not consistent with the evidence. If it were, then alts appreciating in value relative to BTC would threaten crypto doomsday, causing BTC's value relative to USD to decline, and vice versa. That would exhibit a negative correlation, which is exactly the opposite of what we see.

This is not proof, but it is the real world evidence that the theory might be wrong.

There is no evidence for the argument to be consistent with or not. Alts, in aggregate, have not appreciated in value relative to BTC (except for initially, obv); as asserted earlier, they've remained a fairly consistent portion of the total crypto mcap.

[sickpig]

I just had a thought. If you wanted to have a sidechain that itself used proof of work mining (peg a PoW altchain to Bitcoin), how could it really work? The miners would have to get paid, and they surely can't be paid in bitcoins so they would get newly issued altcoins. But those particular altcoins would not be convertible to bitcoins, in spite of any so-called 2-way peg, or if they were perfectly fungible you would still end up with whatever percentage of the coins that had been mined constituting an inconvertible set of coins.

Could the sc miners be paid in txes fee only?

[smooth]

The idea that alts "compete" with BTC is not supported by historical data.

Indeed, data so far suggests that new alts pretty much just compete with *other alts*. The alt-market has maintained 5-10% of bitcoin's market-cap for several years now.

If that were true you would expect hardly any correlation between BTC and alts, but a strong negative correlation between alts. But that is not what actually happens.

What exactly "is not what actually happens"?

There being hardly any correlation with Bitcoin and a negative correlation between alts. In fact there is a strong positive correlation between alts and BTC and likely between alts and each other (because they are all highly correlated with BTC).  At least major alts -- I have no idea what happens with the flash-in-the-pan alts.

Alts have cumulatively been 5-10% of bitcoin's market-cap for years, or are you contesting this? The number of alts used to be <10. Now it's >400. Therefore, alts mostly compete with other alts for aggregate share of the crypto-pie...

Most of those alts are dead or near dead, and many only live for a few weeks. The number of active alts at any given time is probably only a few dozen, and that includes some that have been around and active for years (LTC, NMC, PPC, etc.). That is probably an increase, but not orders of magnitude. Only a total of 27 alts right now have a market cap of at least $1 million.

There is no evidence for the argument to be consistent with or not. Alts, in aggregate, have not appreciated in value relative to BTC (except for initially, obv); as asserted earlier, they've remained a fairly consistent portion of the total crypto mcap.

There is evidence. The evidence is not only the lack of a negative correlation that would support the idea of alts being a threat or even a substitute for BTC, but a strong positive correlation. The evidence directly contradicts the crypto apocalypse theory.

You could construct an alternate theory that alts at up to 10% are positive for BTC but if they ever grew to say 30-50% that would be negative, but I'm skeptical. To get to 30% you have to reach 10% first. The likelihood of getting to 30% is much higher at 10% than 5%. In fact even 6% makes the "threat" somewhat more likely, which is why there should be a negative correlation, or at least not a strong positive one.

I have a alternate theory which is that alts serve as incubators for new ideas (both technical and marketing) that will ultimately help the entire crypto phenomenon and are therefore positive and useful. Any threat that alts present to BTC is dwarfed by the fact that BTC is currently priced for a <0.1% success rate against fiat and even tiny changes (for example, successful ideas trickling up from alts to BTC, or expansion of crypto adoption by alts with novel positioning, branding, and marketing) to that success rate mean far more to the overall value than the crypto apocalypse theory.

[cypherdoc]

I just had a thought. If you wanted to have a sidechain that itself used proof of work mining (peg a PoW altchain to Bitcoin), how could it really work? The miners would have to get paid, and they surely can't be paid in bitcoins so they would get newly issued altcoins. But those particular altcoins would not be convertible to bitcoins, in spite of any so-called 2-way peg, or if they were perfectly fungible you would still end up with whatever percentage of the coins that had been mined constituting an inconvertible set of coins.

Could the sc miners be paid in txes fee only?

yes, of course. Forgot about that.

[iCEBREAKER]

The idea that alts "compete" with BTC is not supported by historical data. Crypto grows and shrinks together, and the truly shit alts (pure pump and dumps, blatant scams, etc.) never account for much other than noise. Given their size, the number of people who lose their money in them isn't even all that high, though of course it is unfortunate that it happens at all. Far more people lost far more money on MtGox then the entirety of altcoin scams, and that's just one Bitcoin scam.

Alti-alt sentiment in the Bitcoin community a harmful obsession and looks a lot like arrogance. It's that sort of attitude, in part, that encourages people to want to create distinct communities.

All good points.  It would serve the Altcoin Haters right if they become what they set out to destroy with this Scamchains BS.

The "There Is No God But Bitcoin And Satoshi Is Its Prophet" was never true, given The Founder's (PBUH) role in dotbit/Namecoin.

[Odalv]

I've always assumed a merge miner has to mine the tx that unlocks the original btc. But do they have to be paid in SideCoin or can it be bitcoin? It would make sense to be sidecoin.

Unlocking doesn't require merged mining. In the paper it can be done two ways:

1. Using a federated model. This is essentially a multisig. This requires no change to BTC. It is ultimately up to the signers to decide (however they want) that the scBTC has been killed.

2. Using SPV-proofs. You provide an SPV-proof (chain of block headers) validating a transaction on the side chain that kills the scBTC, which is accepted by a BTC miner to unlock the coins. During a contest period (suggested to be days), someone else can provide a higher difficulty proof that invalidates yours, canceling the transaction. This requires a new op code.

This is right explanations.

@cypherdoc
It is like lock bitcoins into sandbox. The rule, how to unlock them is written in bitcoin transaction what locks them. (creates sideChain)

It can be one of:

You can spend/unlock Bitcoin from sandbox
1. if you provide M on N signature
2. if you provide SPV-proofs
3. if you provide SPV-proofs AND/OR M of N signature
4. ... many more
=================

Then there are sidechain rules
 - conversion function (1:1 ?)
 - block-size, how ofen is new block generated
 - who will create block(confirm transactions) and how  PoW/Oracles/POS/DPOS/(authority audited by M auditors)

[justusranvier]

The "There Is No God But Bitcoin And Satoshi Is Its Prophet" was never true, given The Founder's (PBUH) role in dotbit/Namecoin.

Just because Satoshi, after the cypherpunks spend decades trying different combinations of ideas in their quest for internet money, figured out the right combination first does not mean he's infallible in everything.

I think we understand why Bitcoin's proof of work works today better than he understood why it worked in 2008.

Namecoin is a mistake - it puts a price on name registry without having price discovery, among other flaws.

[cypherdoc]

well, we got it in place now.  let's see if it holds.  if the $DJI fails to go up and make a new high and starts turning down over the intermed term, while the $DJT has made a new high, we'll get what i've warned to be a Dow Theory non-confirmation which has been seen at a majority of stock mkt tops over the last 100 yrs.  i would be on high alert:

[boumalo]

I know next to nothing about dogecoin (or any alt really) because they don't interest me much, but judging from my friends who are kind of interested in them I'll predict they'll have an OK future. 

Can I ask how long you've been holding Bitcoin? Did you friend see you profit from the previous bubble? Do these people not want to make money or is their capital investment in Dogecoin trivial?

I'm really confused how these people would be holding stash of doge throughout different Bitcoin rallies and not get greedy.

Doge could make it but I think Bitcoin is still a way better bet; Gold is a very good conservative (compared to Bitcoin) bet as well

[brg444]

I know next to nothing about dogecoin (or any alt really) because they don't interest me much, but judging from my friends who are kind of interested in them I'll predict they'll have an OK future. 

Can I ask how long you've been holding Bitcoin? Did you friend see you profit from the previous bubble? Do these people not want to make money or is their capital investment in Dogecoin trivial?

I'm really confused how these people would be holding stash of doge throughout different Bitcoin rallies and not get greedy.

Doge could make it but I think Bitcoin is still a way better bet; Gold is a very good conservative (compared to Bitcoin) bet as well

I don't see how the monetary features/economics of Doge can make it in the long run. I think it's a fad.

[cbeast]

I know next to nothing about dogecoin (or any alt really) because they don't interest me much, but judging from my friends who are kind of interested in them I'll predict they'll have an OK future. 

Can I ask how long you've been holding Bitcoin? Did you friend see you profit from the previous bubble? Do these people not want to make money or is their capital investment in Dogecoin trivial?

I'm really confused how these people would be holding stash of doge throughout different Bitcoin rallies and not get greedy.

Doge could make it but I think Bitcoin is still a way better bet; Gold is a very good conservative (compared to Bitcoin) bet as well

I don't see how the monetary features/economics of Doge can make it in the long run. I think it's a fad.

Yeah, Doge is pure marketing hype. I'm surprised they didn't try to make it this years Christmas gift.

[sickpig]

Sorry for being OT again but I found that this thread contains valuable info about sidechains. Both gmxwell and Luke jr contributed to it with quite useful contributions.

[Adrian-x]

Who here has interpreted the SC paper to mean that you can get your BTC back from scBTC in the case of a SC failure?

I don't interpret it that way.

Before you can get your BTC back, you've got to perform burn transaction on the sidechain.

So if the sidechain ceases to function entirely, you have no way to generate the SPV proof that lets you claim your BTC.

http://www.reddit.com/r/IAmA/comments/2k3u97/we_are_bitcoin_sidechain_paper_authors_adam_back/clhpcke

Atomic swaps allow transfer to happen without waiting on the peg... a result of this means that a single 2wp transfer can basically exit all the people at once.

It does effectively mean that a sidechain abandoned by miners may end up costing more in transaction fees to exit than you'd like. The situation is much brighter than being left with altcoins no one wants, and also ignores the possible (likely?) existance of altruistic miners that continue to mine along just because.

But if some implementation of SC (I do not think SC as idea) become scam or there is a bug then bitcoins may be lost.

So in your opinion, does this mean everyone can get their BTC back in the event of a SC failure with just a larger tx fee?

It is very complex to answer.

SideChain can be created in many ways (but obviously you do want to accept this fact)
SideChain(IDEA) is "concept?" what describes your Bitcoin transaction off the main chain (transaction are not recorded in bitcoin blockchain).
One example of sidechain is bitcoin-exchange (one of them is Bitstamp). Bitstamp exists, and Bitstamp creates off-chain bitcoin transaction.(buys/sells bitcoins)

In term of SideChain(IDEA) it is centralized and ONE ENTITY controlled sidechain. -> It exists now.
 - you can lock your bitcoins in bitstamp controlled address and trade
 - Bitstamp is only miner who creates blockchain (history of trades) . Bitstamp mine transactions -> (who sold/bought, add-to-order-book, market-buy/sell, ... and so on) and Bitstamp publish orderbook.
 - and only Bitstamp can unlock your bitcoin (bitstampBTC)

Bitstamp is two-way-peg SC with 1:1 exchange rate and  ONE ENTITY controlled sidechain

==
Blockstream paper describes how to create different SideChain
 - one of them is Federated peg (M of N entities controlled sidechain) -> it can be created without changes to bitcoin protocol now.
 - I think, it is better than centralized one

==
and finally few variants how to create decentralized (not supported by bitcoin now)

==
this decentralized SC can be even combined with (M of N SC's) or (Single Entity SC) in case there is not enough mining power


=> The questions is  IF/HOW add decentralized SC's.

1) bold above - I'd argue that OT is better for this than SC without the added risk of losing all the coins in the SC.

A Side Chain implies a chain (as in a blockchain - that is mined and runs alongside the bitcoin blockchain)

2) this is how innovation needs to happen, its ethical wrong for a for profit company to make prototypical changes for profit.

3) why change the Protocol, we have all this decentralized innovation in the pipe with no change to Bitcoin needed.

The conclusion I’m left with is, SideChanes will all become ScameCoins, at best they will inflate the utility of a fixed supply of Bitcoin, at worst they will corrupt Bitcoin by disenfranchising miners, i.e. the value of Bitcoin will be in the SC, and as reward halving shrinks, the fees will be going to the SC miners, Bitcoin may become the merged Mined SideChain - the glue that keeps it all together something you have to mine to keep the integrity of the SC alive. And the magic formula that made Bitcoin is eroded.    

The SC concept allows for inflation in that the peg, as it can be adjusted by a predetermined formula, what is missing form an economic perspective is a negative pegging where the owners of the SC have to add more Bitcoin to keep it going.

The answer to you decentralised SC is merged mining, and that is only achieved by incentivising miners with fees, the net result is monetary inflation backed by the Blockchain.  There are other solutions like Spin-offs that have no inflationary effect, I still dont see the need to enable SC MM at all.

[Melbustus]

The idea that alts "compete" with BTC is not supported by historical data.

Indeed, data so far suggests that new alts pretty much just compete with *other alts*. The alt-market has maintained 5-10% of bitcoin's market-cap for several years now.

If that were true you would expect hardly any correlation between BTC and alts, but a strong negative correlation between alts. But that is not what actually happens.

What exactly "is not what actually happens"?

There being hardly any correlation with Bitcoin and a negative correlation between alts. In fact there is a strong positive correlation between alts and BTC and likely between alts and each other (because they are all highly correlated with BTC).  At least major alts -- I have no idea what happens with the flash-in-the-pan alts.

I'm talking whole pie. Crypto gets bigger or smaller as a whole; fraction of ecosystem collectively occupied by alts roughly stays the same.

Alts have cumulatively been 5-10% of bitcoin's market-cap for years, or are you contesting this? The number of alts used to be <10. Now it's >400. Therefore, alts mostly compete with other alts for aggregate share of the crypto-pie...

Most of those alts are dead or near dead, and many only live for a few weeks. The number of active alts at any given time is probably only a few dozen, and that includes some that have been around and active for years (LTC, NMC, PPC, etc.). That is probably an increase, but not orders of magnitude. Only a total of 27 alts right now have a market cap of at least $1 million.

Same point as above. Alt portion of pie stays the same. I don't really care how many there are. If there were fewer alts than before, I wouldn't really be able to say "alts compete with other alts", and maybe that's mostly what you're taking issue with. That's fine. I draw that conclusion from the bigger picture I'm seeing to date, and it's by no means a statistically significant sample set.

There is no evidence for the argument to be consistent with or not. Alts, in aggregate, have not appreciated in value relative to BTC (except for initially, obv); as asserted earlier, they've remained a fairly consistent portion of the total crypto mcap.

There is evidence. The evidence is not only the lack of a negative correlation that would support the idea of alts being a threat or even a substitute for BTC, but a strong positive correlation. The evidence directly contradicts the crypto apocalypse theory.

Again...in aggregate. Again, are you contesting that the alt-marketshare as a whole has not been a fairly consistent 5-10% of bitcoin's mcap over the past few years?

You could construct an alternate theory that alts at up to 10% are positive for BTC but if they ever grew to say 30-50% that would be negative, but I'm skeptical. To get to 30% you have to reach 10% first. The likelihood of getting to 30% is much higher at 10% than 5%. In fact even 6% makes the "threat" somewhat more likely, which is why there should be a negative correlation, or at least not a strong positive one.

I have a alternate theory which is that alts serve as incubators for new ideas (both technical and marketing) that will ultimately help the entire crypto phenomenon and are therefore positive and useful. Any threat that alts present to BTC is dwarfed by the fact that BTC is currently priced for a <0.1% success rate against fiat and even tiny changes (for example, successful ideas trickling up from alts to BTC, or expansion of crypto adoption by alts with novel positioning, branding, and marketing) to that success rate mean far more to the overall value than the crypto apocalypse theory.

I agree that alts serve as incubators for new ideas, and further, that there *are* niches for them which bitcoin will likely never serve. Monero is an obvious example.

But if you're not seeing the theoretical threat to crypto-scarcity (somehow trying to refute the idea of the threat with scant statistically insignificant data?), that's just odd. FWIW, I don't think alts will *actually* dethrone bitcoin and trigger the crypto apocalypse you reference, just that I think it's rational to consider that the scarcity argument for bitcoin/crypto would indeed be threatened if alts gained too much ground (and, no, I don't have a magic threshold number in mind). I really don't see how you can dismiss the theory, unless, again, you're drawing linear conclusions from small amounts of data.

[smooth]

Again...in aggregate. Again, are you contesting that the alt-marketshare as a whole has not been a fairly consistent 5-10% of bitcoin's mcap over the past few years?

Of course not, that is historical fact, although for a short time I think it was somewhat higher. LTC peaked at about $200m, and BTC at about $12b, so that's around 16%, or perhaps 20% for alts in total] $1b, and BTC at about $12b, so that's around 8%, or perhaps 12-15% for alts in total. (I'm not sure of the exact total during that peak, so this is a guess.)

What I'm saying is that if you look at the value fluctuations within that range, the correlation is not consistent with the theory that growing alts gravely threaten Bitcoin. It is not statistically insignificant either, it is highly significant. But it is possible, as I mentioned, that this observation only holds within the historical range and would break down at some higher range. I see no evidence for it, but I can't rule it out.

If I had to guess I'd say it is possible the Crypto Apocalypse theory only holds if Bitcoin were itself to reach a much higher valuation first. Given that all crypto is currently embryonic, factors contributing to the overall success dominate, and benefit all viable cryptos (including Bitcoin) as potential participants in that overall success. This includes even direct competing alts showing Bitcoin how to do things better, or pushing it to do so. To tie this into the current conversation, to the extent that side chains are a reaction to alts, and side chains make Bitcoin better, than alts have helped Bitcoin!

But if you're not seeing the theoretical threat to crypto-scarcity (somehow trying to refute the idea of the threat with scant statistically insignificant data?), that's just odd. FWIW, I don't think alts will *actually* dethrone bitcoin and trigger the crypto apocalypse you reference, just that I think it's rational to consider that the scarcity argument for bitcoin/crypto would indeed be threatened if alts gained too much ground (and, no, I don't have a magic threshold number in mind). I really don't see how you can dismiss the theory, unless, again, you're drawing linear conclusions from small amounts of data.

I don't dismiss the theory at all, I merely question it.

I think it is possible for a better crypto to dethrone Bitcoin without invalidating the entire concept, just as Bitcoin dethroned previous failed or aborted attempts at cryptocurrency and far surpassed their success. If something far surpasses Bitcoin's success, then Bitcoin will turn out to be just as irrelevant as those earlier efforts, except that all are relevant as stepping stones that lead to the next. Given that roughly a factor of at least 1000 separates Bitcoin from fiat, there is a lot of room at the top.

Quite possibly none will ever exist, or doesn't exist now, so this is not intended as an endorsement of any current or even foreseen alt. I just acknowledge the possibility and question the theory that anything challenging or surpassing Bitcoin invalidates the entire concept. In fact it could very well take the concept to a far greater level of success, just as Bitcoin did.

[dEBRUYNE]

Again...in aggregate. Again, are you contesting that the alt-marketshare as a whole has not been a fairly consistent 5-10% of bitcoin's mcap over the past few years?

Of course not, that is historical fact, although for a short time I think it was somewhat higher. LTC peaked at about $200m, and BTC at about $12b, so that's around 16%, or perhaps 20% for alts in total. (I'm not sure of the exact total during that peak, so this is a guess.)

What I'm saying is that if you look at the value fluctuations within that range, the correlation is not consistent with the theory that growing alts gravely threaten Bitcoin. It is not statistically insignificant either, it is highly significant. But it is possible, as I mentioned, that this observation only holds within the historical range and would break down at some higher range. I see no evidence for it, but I can't rule it out.

If I had to guess I'd say it is possible the Crypto Apocalypse theory only holds if Bitcoin were itself to reach a much higher valuation first. Given that all crypto is current embryonic, factors contributing to the overall success dominate, and benefit all viable cryptos (including Bitcoin) as potential participants in that overall success. This includes even direct competing alts showing Bitcoin how to do things better, or pushing it to do so. To tie this into the current conversation, to the extent that side chains are a reaction to alts, and side chains make Bitcoin better, than alts have helped Bitcoin!

But if you're not seeing the theoretical threat to crypto-scarcity (somehow trying to refute the idea of the threat with scant statistically insignificant data?), that's just odd. FWIW, I don't think alts will *actually* dethrone bitcoin and trigger the crypto apocalypse you reference, just that I think it's rational to consider that the scarcity argument for bitcoin/crypto would indeed be threatened if alts gained too much ground (and, no, I don't have a magic threshold number in mind). I really don't see how you can dismiss the theory, unless, again, you're drawing linear conclusions from small amounts of data.

I don't dismiss the theory at all, I merely question it.

I think it is possible for a better crypto to dethrone Bitcoin without invalidating the entire concept, just as Bitcoin dethroned previous failed or aborted attempts at cryptocurrency and far surpassed their success. If something far surpasses Bitcoin's success, then Bitcoin will turn out to be just as irrelevant as those earlier efforts, except that all are relevant as stepping stones that lead to the next. Given that roughly a factor of at least 1000 separates Bitcoin from fiat, there is a lot of room at the top.

Quite possibly none will ever exist, or doesn't exist now, so this is not intended as an endorsement of any current or even foreseen alt. I just acknowledge the possibility and question the theory that anything challenging or surpassing Bitcoin invalidates the entire concept. In fact it could very well take the concept to a far greater level of success, just as Bitcoin did.

LTC actually peaked around 1 billion marketcap -> http://coinmarketcap.com/currencies/litecoin/#charts. Agree with the rest of your statement. BTC-E alts' ratio also peaked around november.

[dillpicklechips]

I miss the banter about gold...

BTW a good sidechain thread: https://bitcointalk.org/index.php?topic=831527.0 

[smooth]

LTC actually peaked around 1 billion marketcap -> http://coinmarketcap.com/currencies/litecoin/#charts.

Corrected above. I remembered that ratio was historically high but completely failed on the number.

[Adrian-x]

Bitcoin competitors don’t eat away at Bitcoin dominance, the alts that innovate - do something Bitcoin isn’t capable of doing, - they add to the ecosystem, the others that just come and go in a flash, help distribute bitcoins, they represent growth in the network  as scam coins get sold for bitcoins.

AltCoins as part of the coin market cap are not correlated with the overall success of Bitcoin’s growth in market cap, they are just a High-Beta reflection of market sentiment and innovation opportunity in the Bitcoin space.

SC as AltCoins would not have the same impact, their innovation potential is either limited to that of PoS or Bitcoin’s existing PoW as a merge mined coin.  Growth with trust free SC AltCoins is growth alongside Bitcoin that doesn’t reflect back market value to the miners and the mining equilibrium that has powered Bitcoins growth in mining and value.

In practice SC are a new investment opportunity for those who want to leverage bitcoins foothold in success. SC Alts are likely to attract wealth that goes into the SC coin that doesn’t go into Bitcoin but uses the existing wealth invested in Bitcoin as a hedge.  

[iCEBREAKER]

Bitcoin Maximalism

I, for one, welcome our new ScamChain overlords.