Gold collapsing. Bitcoin UP.

[smooth]

I agree, but I am honestly still having trouble wrapping my head about how BTC would react if the value of such a capped scBTC would go up because of increased scarcity of available unit on the sidechain. From my point of view arbitrage would likely balance both units price.

There is no arbitrage.

Explain? You're not the only one who's gonna want to dump so of that premium priced scBTC for more Bitcoins

You have asymmetric information, just like any pump-and-dump scam. Other people think that the growth in value is organic and reflects growing demand, while you know that you have actually rigged the market by cornering 90% of the scBTC, and that support is in the process of going away as you (secretly) cash out.

I guess that is arbitrage (in your favor), in a sense.

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[cypherdoc]

i agree.  focus on my scenario.

I guess this is a possible scenario but I find it highly unlikely and a fail to see exactly how the whale profits from such attack? Can you explain further? The way I see it, yes the last out the door may lose but the first in do not gain anything other than securing is stake on the new chain?

I also think the growth of BTC's market cap will eventually mitigate such an attack as what you are suggesting assumes the "attacker" a considerable % stake of the BTC market

I'd like if you could develop your idea more regarding the first part of my comment.

sure.

remember, the scBTC will start out below the BTC when first introduced.  who knows, it could be close to zero, or may quickly elevate just below the BTC price.  then the speculator launches the attack by pumping BTC thru the peg. at the same time, he embarks on a forum blitz saying how great the SC is and how it will take over.  since these scBTC will be traded on an open exchange, the market will view a rising #scBTC and a rising price on the SC as validation of the innovation, just like you did when questioned.  if i saw that happening, i'd move a large chunk of my BTC into scBTC immediately b/c i also know there's a risk free put in place.  especially if the SC has been functioning bug free for a number of months.  as more and more ppl make the same conclusion, the scBTC will rise even more dragging up the BTC price as arbitration sets in.  but astute investors will see that the scBTC is leading the BTC price or at least rising faster.  this would indicate that the SC may take over.  as that happens, cold wallet hodlers are placed into a bind.  either follow or risk losing value as i think miners will also make the switch to the SC b/c their fees and block rewards paid in scBTC are higher.  once enough of this happens in a mass transition, i think it's logical to believe the Bitcoin will become the MM'd chain and the SC the MC.  this will occur if the added innovation is valid, say like perfect anonymity.

so the incentive is to move first or risk losing value by having the MC become obsoleted.

the problem is even worse when you have an innovation that is controversial; like faster confirmation times.  a speculator will pump the price until others follow, and then dump, whipsawing everybody.

[smooth]

so the incentive is to move first or risk losing value by having the MC become obsoleted.

I still don't see how you lose value as long as the right to exchange is maintained, and the main chain survives at all. You can always exchange your BTC for scBTC later.

Perhaps you lose the opportunity cost of buying at a premium instead of making an exchange, but that should be fairly small (value of buying on an exchange instead of waiting days for an cross-chain exchange).

[cypherdoc]

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

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

the basic problem is right here.  separating the BTC from its blockchain will allow exploits.

[HeliKopterBen]

I posted this just now https://bitcointalk.org/index.php?topic=831527.msg9374056#msg9374056.  Is my logic sound?

[cypherdoc]

so the incentive is to move first or risk losing value by having the MC become obsoleted.

I still don't see how you lose value as long as the right to exchange is maintained, and the main chain survives at all. You can always exchange your BTC for scBTC later.

Perhaps you lose the opportunity cost of buying at a premium instead of making an exchange, but that should be fairly small (value of buying on an exchange instead of waiting days for an cross-chain exchange).

if you stay behind your risk goes up b/c now the MC is the MM'd chain, say at only 40% of the SC hashrate.  less security and chance for 51% attacks to block your SPV proof attempting to get out of BTC into scBTC.  plus, the mining fee to construct the proof has to go up b/c they will be paid in BTC which is priced lower in fiat terms.

[smooth]

so the incentive is to move first or risk losing value by having the MC become obsoleted.

I still don't see how you lose value as long as the right to exchange is maintained, and the main chain survives at all. You can always exchange your BTC for scBTC later.

Perhaps you lose the opportunity cost of buying at a premium instead of making an exchange, but that should be fairly small (value of buying on an exchange instead of waiting days for an cross-chain exchange).

if you stay behind your risk goes up b/c now the MC is the MM'd chain, say at only 40% of the SC hashrate.  less security and chance for 51% attacks to block your SPV proof attempting to get out of BTC into scBTC.  plus, the mining fee to construct the proof has to go up b/c they will be paid in BTC which is priced lower in fiat terms.

I'm pretty sure the mining fee would be negligible unless you are like the last one out because you can always do the exchanges in very large quantity. Given that there is no reason for BTC to be priced (significantly) lower so that is a negligible factor.

I fail to see how this is anything but an upgrade. An economic majority of bitcoin (meaning miners, nodes, and users all) could decide right now to change anything they want about BTC and if you don't like it, too bad.

[smooth]

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

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

the basic problem is right here.  separating the BTC from its blockchain will allow exploits.

I consider that statement to be Marketing. As such, I'm not sure it is possible for a Marketing statement to have an exploit.

BTC can only exist on the Bitcoin chain. scBTC is an alt that is backed by BTC.

If scBTC defeats BTC it means an alt has defeated BTC. I don't have a problem with that, but some do, of course.

[cypherdoc]

so the incentive is to move first or risk losing value by having the MC become obsoleted.

I still don't see how you lose value as long as the right to exchange is maintained, and the main chain survives at all. You can always exchange your BTC for scBTC later.

Perhaps you lose the opportunity cost of buying at a premium instead of making an exchange, but that should be fairly small (value of buying on an exchange instead of waiting days for an cross-chain exchange).

if you stay behind your risk goes up b/c now the MC is the MM'd chain, say at only 40% of the SC hashrate.  less security and chance for 51% attacks to block your SPV proof attempting to get out of BTC into scBTC.  plus, the mining fee to construct the proof has to go up b/c they will be paid in BTC which is priced lower in fiat terms.

I'm pretty sure the mining fee would be negligible unless you are like the last one out because you can always do the exchanges in very large quantity. Given that there is no reason for BTC to be priced (significantly) lower so that is a negligible factor.

I fail to see how this is anything but an upgrade. An economic majority of bitcoin (meaning miners, nodes, and users all) could decide right now to change anything they want about BTC and if you don't like it, too bad.

if you accept the scenario as i've outlined it, i think there would be an incentive to 51% attack the Bitcoin MC to block as many BTC from entering the SC as possible to decrease the eventual supply of scBTC and therefore increase its price.  

again, it's more complicated than a simple upgrade b/c an upgrade just involves downloading an updated client.  my scenario requires a wholesale movement of all BTC to scBTC which exposes them to loss by hacking and identity exposure.

[Odalv]

@cypherdoc

There is possible to build endless variation of SC's.

Let's talk about small group of them
 - Symmetric two-way peg
 - with conversion rate 1:1

a) We can verify they are Symmetric two-way peg b/c anybody can send anytime BTC to scBTC and back with conversion rate 1:1.
b) if (a) is not possible then this SC is not "Symmetric two-way peg with conversion rate 1:1"

[brg444]

sure.

remember, the scBTC will start out below the BTC when first introduced.  who knows, it could be close to zero, or may quickly elevate just below the BTC price.  then the speculator launches the attack by pumping BTC thru the peg. at the same time, he embarks on a forum blitz saying how great the SC is and how it will take over.  since these scBTC will be traded on an open exchange, the market will view a rising #scBTC and a rising price on the SC as validation of the innovation, just like you did when questioned.  if i saw that happening, i'd move a large chunk of my BTC into scBTC immediately b/c i also know there's a risk free put in place.  especially if the SC has been functioning bug free for a number of months.  as more and more ppl make the same conclusion, the scBTC will rise even more dragging up the BTC price as arbitration sets in.  but astute investors will see that the scBTC is leading the BTC price or at least rising faster.  this would indicate that the SC may take over.  as that happens, cold wallet hodlers are placed into a bind.  either follow or risk losing value as i think miners will also make the switch to the SC b/c their fees and block rewards paid in scBTC are higher.  once enough of this happens in a mass transition, i think it's logical to believe the Bitcoin will become the MM'd chain and the SC the MC.  this will occur if the added innovation is valid, say like perfect anonymity.

so the incentive is to move first or risk losing value by having the MC become obsoleted.

the problem is even worse when you have an innovation that is controversial; like faster confirmation times.  a speculator will pump the price until others follow, and then dump, whipsawing everybody.

 

that is not an incentive to create a speculative attack. basically you just reiterated your mass exodus scenario but you didn't prove why someone would want to precipitate this exodus and how it would benefit them (other than the obvious "don't be left holding the bag")

[cypherdoc]

@cypherdoc

There is possible to build endless variation of SC's.

Let's talk about small group of them
 - Symmetric two-way peg
 - with conversion rate 1:1

a) We can verify they are Symmetric two-way peg b/c anybody can send anytime BTC to scBTC and back with conversion rate 1:1.
b) if (a) is not possible this this SC is not "Symmetric two-way peg with conversion rate 1:1"

i'm perfectly aware of that.

my baseline case includes those assumptions mainly b/c i think that will be the most common variety of SC created.

but that doesn't invalidate what i've outlined to be an expected speculative attack.

[cypherdoc]

sure.

remember, the scBTC will start out below the BTC when first introduced.  who knows, it could be close to zero, or may quickly elevate just below the BTC price.  then the speculator launches the attack by pumping BTC thru the peg. at the same time, he embarks on a forum blitz saying how great the SC is and how it will take over.  since these scBTC will be traded on an open exchange, the market will view a rising #scBTC and a rising price on the SC as validation of the innovation, just like you did when questioned.  if i saw that happening, i'd move a large chunk of my BTC into scBTC immediately b/c i also know there's a risk free put in place.  especially if the SC has been functioning bug free for a number of months.  as more and more ppl make the same conclusion, the scBTC will rise even more dragging up the BTC price as arbitration sets in.  but astute investors will see that the scBTC is leading the BTC price or at least rising faster.  this would indicate that the SC may take over.  as that happens, cold wallet hodlers are placed into a bind.  either follow or risk losing value as i think miners will also make the switch to the SC b/c their fees and block rewards paid in scBTC are higher.  once enough of this happens in a mass transition, i think it's logical to believe the Bitcoin will become the MM'd chain and the SC the MC.  this will occur if the added innovation is valid, say like perfect anonymity.

so the incentive is to move first or risk losing value by having the MC become obsoleted.

the problem is even worse when you have an innovation that is controversial; like faster confirmation times.  a speculator will pump the price until others follow, and then dump, whipsawing everybody.

 

that is not an incentive to create a speculative attack. basically you just reiterated your mass exodus scenario but you didn't prove why someone would want to precipitate this exodus and how it would benefit them (other than the obvious "don't be left holding the bag")

the speculator would be converting to scBTC when the price was low.  as he continues to pump across the peg, the scBTC price will rise.  as the SC attracts more conversion of BTC to scBTC, the price will rise even more.  as miners and nodes switch to the SC, price should rise even more. at some point the price of BTC will drop below that of scBTC b/c the MC will become the MM'd one and therefore less secure.  the last ones out of the MC may get blocked by 51% attacks or their SPV proof fees might rise to very high levels.

in the scenario where the innovation is invalid and the MC is destined to stay the MC, he could just create a pump and dump of scBTC.

[solex]

Back to the gold topic.

There is a referendum in Switzerland, in November, which is likely to secure a yes vote that the SNB holds 20% of its assets in gold (currently at 7.6%). As soon as this passes the bank will have five years to reach the 20% target. There is no legal escape for it. Considering that the SNB balance sheet has recently blown out Fed/BoE/BoJ-style - it will have to buy up to 1,700 tons of gold in the open market - and take delivery!

http://www.zerohedge.com/news/2014-10-28/things-make-you-go-hmmm-swiss-gold-status-quo-showdown

I really think this will put a floor under the current gold price, and maybe even spark another medium-term rally.

[Odalv]

@cypherdoc

There is possible to build endless variation of SC's.

Let's talk about small group of them
 - Symmetric two-way peg
 - with conversion rate 1:1

a) We can verify they are Symmetric two-way peg b/c anybody can send anytime BTC to scBTC and back with conversion rate 1:1.
b) if (a) is not possible this this SC is not "Symmetric two-way peg with conversion rate 1:1"

i'm perfectly aware of that.

my baseline case includes those assumptions mainly b/c i think that will be the most common variety of SC created.

but that doesn't invalidate what i've outlined to be an expected speculative attack.

In case STWP (Symmetric two-way peg 1:1)
 - you can deposit bitcoins to SC anytime (today, tomorrow ... in year 2140) by bitcoin transaction -> if you know private keys of your bitcoins.
 - you can withdraw bitcoins from SC anytime by bitcoin transaction -> if you know how to create proof you destroyed scBTC
 - if you deposit  X bitcoins then you can  withdraw X (minus transaction fees) -> you did not spent scBTC

[cypherdoc]

@cypherdoc

There is possible to build endless variation of SC's.

Let's talk about small group of them
 - Symmetric two-way peg
 - with conversion rate 1:1

a) We can verify they are Symmetric two-way peg b/c anybody can send anytime BTC to scBTC and back with conversion rate 1:1.
b) if (a) is not possible this this SC is not "Symmetric two-way peg with conversion rate 1:1"

i'm perfectly aware of that.

my baseline case includes those assumptions mainly b/c i think that will be the most common variety of SC created.

but that doesn't invalidate what i've outlined to be an expected speculative attack.

In case STWP (Symmetric two-way peg 1:1)
 - you can deposit bitcoins to SC anytime (today, tomorrow ... in year 2140) by bitcoin transaction -> if you know private keys of your bitcoins.
 - you can withdraw bitcoins from SC anytime by bitcoin transaction -> if you know how to create proof you destroyed scBTC
 - if you deposit  X bitcoins then you can  withdraw X (minus transaction fees) -> you did not spent scBTC

as i understand it, the SPV proof from BTC to scBTC has to be mined.  if enough miners switch over to the SC, say half, the MC could become more susceptible to a 51% attack that might prevent these SPV proofs from being constructed, no?

edit:  i know there's this federated thing that's possible but that's centralized.

[cypherdoc]

i gotta go now, wife's B day.

back later.

[brg444]

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

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

the basic problem is right here.  separating the BTC from its blockchain will allow exploits.

I consider that statement to be Marketing. As such, I'm not sure it is possible for a Marketing statement to have an exploit.

BTC can only exist on the Bitcoin chain. scBTC is an alt that is backed by BTC.

If scBTC defeats BTC it means an alt has defeated BTC. I don't have a problem with that, but some do, of course.

precisely, in which case the BTC core would likely implement features of the apparent improved sidechain so as to mitigate the risk that exist in the exodus of the whole ecosystem

[Odalv]

@cypherdoc

There is possible to build endless variation of SC's.

Let's talk about small group of them
 - Symmetric two-way peg
 - with conversion rate 1:1

a) We can verify they are Symmetric two-way peg b/c anybody can send anytime BTC to scBTC and back with conversion rate 1:1.
b) if (a) is not possible this this SC is not "Symmetric two-way peg with conversion rate 1:1"

i'm perfectly aware of that.

my baseline case includes those assumptions mainly b/c i think that will be the most common variety of SC created.

but that doesn't invalidate what i've outlined to be an expected speculative attack.

In case STWP (Symmetric two-way peg 1:1)
 - you can deposit bitcoins to SC anytime (today, tomorrow ... in year 2140) by bitcoin transaction -> if you know private keys of your bitcoins.
 - you can withdraw bitcoins from SC anytime by bitcoin transaction -> if you know how to create proof you destroyed scBTC
 - if you deposit  X bitcoins then you can  withdraw X (minus transaction fees) -> you did not spent scBTC

as i understand it, the SPV proof from BTC to scBTC has to be mined.  if enough miners switch over to the SC, say half, the MC could become more susceptible to a 51% attack that might prevent these SPV proofs from being constructed, no?

edit:  i know there's this federated thing that's possible but that's centralized.

Yes, now You and me can agree and create private Federated aSymmetricTWP (private b/c it is not public information, aSymmetric b/c we do not allow free investing -> only you and me can withdraw).
We can create  2 of 2 MultiSignatureAddress MSA (next algho is only example, so it may contains errors .. just for illustration)
 - you want to participate with 3 BTC I will with 2 BTC
 - offline(by email) : I'll sign you transaction you are able to withdraw 3 BTC from MSA (and send rest to my address)
 - offline: You'll sign transaction for me I'm able to withdraw 2 BTC from MSA (and send rest to your address)
 - offline: we will both sign  I deposit 2 BTC and you deposit 3 BTC to MSA
 - online: we will broadcast MSA transaction (MSA will be funded with 5 BTC )

Now we can transact offline (we do not need miners on SC) but we have SC.

[explorer]

Back to the gold topic.

There is a referendum in Switzerland, in November, which is likely to secure a yes vote that the SNB holds 20% of its assets in gold (currently at 7.6%). As soon as this passes the bank will have five years to reach the 20% target. There is no legal escape for it. Considering that the SNB balance sheet has recently blown out Fed/BoE/BoJ-style - it will have to buy up to 1,700 tons of gold in the open market - and take delivery!

http://www.zerohedge.com/news/2014-10-28/things-make-you-go-hmmm-swiss-gold-status-quo-showdown

I really think this will put a floor under the current gold price, and maybe even spark another medium-term rally.

I'm very interested to see what spin and hype will be deployed toward a NO vote.  Or just plan old vote rigging. A YES vote would send a shockwave. ..