Gold collapsing. Bitcoin UP.

[tvbcof]

...
As for the Blockstream guys, making a living off an open-source project is very common and most often benefits both the community and the clients who will pay them.  You may be serious in trying to spin this thing as something nefarious, but in that case you are just showing more of you ignorance.

The point is less that "it happens all the time", and more that SC are potentially competition for Bitcoin as much as they are collaboration with Bitcoin.
How many of your competition work in the core engine of your business, and how comfortable are you with that notion?

I strongly reject the premise that there is any 'competition' here.  Sidechains are to me (and have been since mid 2011) the natural progression of Bitcoin which will allow it to serve it's promise to the edges of it's userbase (free individuals) in a flexible way while preserving defense against those who would be threatened by such a solution and allowing it to adapt to meet the defensive challenges.  Put another way; to scale.

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[N12]

simple theory question for all SC proponents.  so simple in fact what am i missing?

we have 13M BTC @ around $325.  SC comes along and lets say 3M BTC --> scBTC (just for illustration).  we know that the price of scBTC has to be lower given MM, newness, being unproven, risk of failure, etc.  let's say price starts off @ $100.

why don't arb bots circle back around and drive BTC price down to say $250-270 or whatever the equilibrium is btwn BTC and scBTC, which we know is lower?  multiply this by 1000 SC's.

I haven't kept up with the side chain hype. What's the mechanism of arbitrage here? How would you be able to profit off a price differential between this sidechain coin and bitcoin?

[cypherdoc]

simple theory question for all SC proponents.  so simple in fact what am i missing?

we have 13M BTC @ around $325.  SC comes along and lets say 3M BTC --> scBTC (just for illustration).  we know that the price of scBTC has to be lower given MM, newness, being unproven, risk of failure, etc.  let's say price starts off @ $100.

why don't arb bots circle back around and drive BTC price down to say $250-270 or whatever the equilibrium is btwn BTC and scBTC, which we know is lower?  multiply this by 1000 SC's.

I haven't kept up with the side chain hype. What's the mechanism of arbitrage here? How would you be able to profit off a price differential between this sidechain coin and bitcoin?

read up above

[cypherdoc]

My point being there will be a motive to short the SC token.

great point.  the shorts will do this b/c they will recognize that the SC is less secure and more prone to failure.

as they drive the price of scBTC down, all those here who think the 1:1 peg demands that the price of 1 BTC= 1 scBTC will sell their BTC to follow.

[N12]

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

its a 2 way peg, so both BTC and scBTC can move freely back and forth.

Can you elaborate? How are the both to be pegged? How is the peg rate determined, and does it float?

[Odalv]

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

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

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

But why will you move the coins in the first place???

for experimentation, speculation, stupidity, pump and dump, who knows?  we know it will occur.

But why will you sell them for a lower price instead of transfering them back to BTC?

you don't have to do anything.  the arb bots will take care of it for you.

What??? Someone have to sell the cheap coins?

do you seriously think that when a SC is first established on Day 1, 1 scBTC = 1 BTC in fiat terms?.  it can't be b/c of newness, less security, chance of failure, etc.  with time, as it proves itself, the arb bots will equilibrate the price but at a lower level b/c of the always present risk of failure of the SC.  the SC is not Bitcoin.  

"newness, less security, chance of failure, etc." is compensated with "increased utility"  so yes on Day 1, 1 scBTC = 1 BTC in is fiat terms and forever until SC crash.

another way to address your point is that a "theoretical" will never trump a "known".

we know MM is less secure than direct mining.  we don't know that a new untested "innovation" will counter weigh the value of less security.

MM is only one type of SC (it is good only for world wide use).  It is possible to use "oracle" for mining or ...  group of people at an island can use private SC with fixed difficulity (b/c they know each others) ... they can use their virtual currency, and this currency can be exchanged 1:1 bitcoin. They do not have to pay transaction fees if they agree and use only 1 confirmation (every 2 min).

any SC that employs security any less than MM is even less secure.  therefore, its scBTC will be valued even less.  the feedback thru arb bots will be to drag down BTC even more.

Alot of scBTC will be only valuable inside community what creates(and secure) them. But inside this community it will have value exactly 1 BTC. No matter what is your value. It is win : win strategy
a) they do not spam bitcoin network.
b) they do not pay transaction fees.

And it can be more secure than Bitcoin -> b/c those members can met in personally and build safe "oracle (timestamp server)" what will sign every transaction.

[tvbcof]

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

its a 2 way peg, so both BTC and scBTC can move freely back and forth.

Can you elaborate? How are the both to be pegged? How is the peg rate determined, and does it float?

The free market.  Shudder the thought.

[Kupsi]

My point being there will be a motive to short the SC token.

great point.  the shorts will do this b/c they will recognize that the SC is less secure and more prone to failure.

as they drive the price of scBTC down, all those here who think the 1:1 peg demands that the price of 1 BTC= 1 scBTC will sell their BTC to follow.

No one will try to short scBTC. If someone tried, people will buy the lower priced scBTC, transfer them to BTC and sell them for the real price.

[Kupsi]

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

its a 2 way peg, so both BTC and scBTC can move freely back and forth.

Can you elaborate? How are the both to be pegged? How is the peg rate determined, and does it float?

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

[cypherdoc]

My point being there will be a motive to short the SC token.

great point.  the shorts will do this b/c they will recognize that the SC is less secure and more prone to failure.

as they drive the price of scBTC down, all those here who think the 1:1 peg demands that the price of 1 BTC= 1 scBTC will sell their BTC to follow.

No one will try to short scBTC. If someone tried, people will buy the lower priced scBTC, transfer them to BTC and sell them for the real price.

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

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

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

[Odalv]

My point being there will be a motive to short the SC token.

great point.  the shorts will do this b/c they will recognize that the SC is less secure and more prone to failure.

as they drive the price of scBTC down, all those here who think the 1:1 peg demands that the price of 1 BTC= 1 scBTC will sell their BTC to follow.

No one will try to short scBTC. If someone tried, people will buy the lower priced scBTC, transfer them to BTC and sell them for the real price.

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

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

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

I'll take your arguments only if you sell me your bitcoins for $100 or at least you find me somebody who sell. :-)

[cypherdoc]

Alot of scBTC will be only valuable inside community what creates(and secure) them. But inside this community it will have value exactly 1 BTC. No matter what is your value. It is win : win strategy
a) they do not spam bitcoin network.
b) they do not pay transaction fees.

And it can be more secure than Bitcoin -> b/c those members can met in personally and build safe "oracle (timestamp server)" what will sign every transaction.

why use Bitcoin then?  you might as well use Berkshare Bucks if you want or desire such a centralized solution.

[cypherdoc]

My point being there will be a motive to short the SC token.

great point.  the shorts will do this b/c they will recognize that the SC is less secure and more prone to failure.

as they drive the price of scBTC down, all those here who think the 1:1 peg demands that the price of 1 BTC= 1 scBTC will sell their BTC to follow.

No one will try to short scBTC. If someone tried, people will buy the lower priced scBTC, transfer them to BTC and sell them for the real price.

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

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

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

I'll take your arguments only if you sell me your bitcoins for $100 or at least you find me somebody who sell. :-)

you can try to personalize this but it doesn't negate my generalized market based argument.

[N12]

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

its a 2 way peg, so both BTC and scBTC can move freely back and forth.

Can you elaborate? How are the both to be pegged? How is the peg rate determined, and does it float?

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

But how does this work? Is it just a way of destroying Bitcoins without actually destroying them (ie destroying Bitcoin and creating Sidecoins and vice versa creating Bitcoins and destroying Sidecoins, "converting" them 1:1) at the protocol level? I suppose cypherdoc's argument is that assuming Sidecoins will be valued less than Bitcoins of equal convertible value, people will be arbitraging that.

If I have understood correctly, then this doesn't seem a problem. To profit off this arbitrage, you need to buy Sidecoins (for USD say) and sell them for Bitcoins (selling those again). Thus the price has to rise to a level where friction prohibits arbitrage. It sounds like we're discussing a perpetuum mobile here. Either that, or I still misunderstand.

[Odalv]

Alot of scBTC will be only valuable inside community what creates(and secure) them. But inside this community it will have value exactly 1 BTC. No matter what is your value. It is win : win strategy
a) they do not spam bitcoin network.
b) they do not pay transaction fees.

And it can be more secure than Bitcoin -> b/c those members can met in personally and build safe "oracle (timestamp server)" what will sign every transaction.

why use Bitcoin then?  you might as well use Berkshare Bucks if you want or desire such a centralized solution.

b/c
advantage:
at the moment I need some utility (e.g. I want trade on exchange, I want buy cofe or gas) =>

I accept:
at the same moment I cannot make international transfers. I can only transact with small group who accepts SC (for some utility).

[cypherdoc]

Alot of scBTC will be only valuable inside community what creates(and secure) them. But inside this community it will have value exactly 1 BTC. No matter what is your value. It is win : win strategy
a) they do not spam bitcoin network.
b) they do not pay transaction fees.

And it can be more secure than Bitcoin -> b/c those members can met in personally and build safe "oracle (timestamp server)" what will sign every transaction.

why use Bitcoin then?  you might as well use Berkshare Bucks if you want or desire such a centralized solution.

b/c
advantage:
at the moment I need some utility (e.g. I want trade on exchange, I want buy cofe or gas) =>

I accept:
at the same moment I cannot make international transfers. I can only transact with small group who accepts SC (for some utility).

well then, it's obvious you're putting your priorities and wants above those of the community in general.  in other words, you want the Bitcoin network to provide the security for your localized SC and you don't care if the price of BTC drops as a result.

[Odalv]

Alot of scBTC will be only valuable inside community what creates(and secure) them. But inside this community it will have value exactly 1 BTC. No matter what is your value. It is win : win strategy
a) they do not spam bitcoin network.
b) they do not pay transaction fees.

And it can be more secure than Bitcoin -> b/c those members can met in personally and build safe "oracle (timestamp server)" what will sign every transaction.

why use Bitcoin then?  you might as well use Berkshare Bucks if you want or desire such a centralized solution.

b/c
advantage:
at the moment I need some utility (e.g. I want trade on exchange, I want buy cofe or gas) =>

I accept:
at the same moment I cannot make international transfers. I can only transact with small group who accepts SC (for some utility).

well then, it's obvious you're putting your priorities and wants above those of the community in general.  in other words, you want the Bitcoin network to provide the security for your localized SC and you don't care if the price of BTC drops as a result.

if BTC drops as a result then same happens to scBTC. But I do not know why. The less BTC is available at MC the more scarce BTC are, and the more utility BTC can provide. SC does not print new money.

SC brings new utility. (value)

[Kupsi]

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

its a 2 way peg, so both BTC and scBTC can move freely back and forth.

Can you elaborate? How are the both to be pegged? How is the peg rate determined, and does it float?

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

But how does this work? Is it just a way of destroying Bitcoins without actually destroying them (ie destroying Bitcoin and creating Sidecoins and vice versa creating Bitcoins and destroying Sidecoins, "converting" them 1:1) at the protocol level? I suppose cypherdoc's argument is that assuming Sidecoins will be valued less than Bitcoins of equal convertible value, people will be arbitraging that.

If I have understood correctly, then this doesn't seem a problem. To profit off this arbitrage, you need to buy Sidecoins (for USD say) and sell them for Bitcoins (selling those again). Thus the price has to rise to a level where friction prohibits arbitrage. It sounds like we're discussing a perpetuum mobile here. Either that, or I still misunderstand.

You got it right.

[molecular]

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

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

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

But why will you move the coins in the first place???

for experimentation, speculation, stupidity, pump and dump, who knows?  we know it will occur.

But why will you sell them for a lower price instead of transfering them back to BTC?

you don't have to do anything.  the arb bots will take care of it for you.

What??? Someone have to sell the cheap coins?

do you seriously think that when a SC is first established on Day 1, 1 scBTC = 1 BTC in fiat terms?.  it can't be b/c of newness, less security, chance of failure, etc.  with time, as it proves itself, the arb bots will equilibrate the price but at a lower level b/c of the always present risk of failure of the SC.  the SC is not Bitcoin. 

I think there wont be a need for scBTC <-> fiat exchange. Since coins can be moved to main chain with low cost, it doesn't make much sense to directly trade sc/fiat, does it? As someone else put it: why would anyone sell scBTC when you can just move them back to BTC main chain?

[molecular]

simple theory question for all SC proponents.  so simple in fact what am i missing?

we have 13M BTC @ around $325.  SC comes along and lets say 3M BTC --> scBTC (just for illustration).  we know that the price of scBTC has to be lower given MM, newness, being unproven, risk of failure, etc.  let's say price starts off @ $100.

why don't arb bots circle back around and drive BTC price down to say $250-270 or whatever the equilibrium is btwn BTC and scBTC, which we know is lower?  multiply this by 1000 SC's.

Btc price would go up first, because lower monetary base in the proven old bitcoin block chain (13m -> 10m)

no, the BTC have just been transformed to lower value units, scBTC, b/c they have been moved to a less secure, unproven ledger.  this will drag down the BTC price to an equilibrium price btwn the two.

In order for the arb to work, the coins have to move back to the bitcoin blockchain.

The first app is a mixing service for stolen coins it is likely there will be arb opportunities and likely Bitcoin price will drop.

Why? People will just move dirty BTC to mixSCBTC, stirr well, and then move them back to mainchain, no?