Gold collapsing. Bitcoin UP.

[NewLiberty]

All I'm saying is the Blockchain is the money, dont mess with it, I care about my private keys like everyone else but the value is in the ledger moving value to other ledgers is actually a threat. This isn't code, it's and economic experiment that parent child relationship is not defined in code, its defined by market forces, I'm not trolling, to be clear I am pro secure trust free 1:1 Pegs that can be diploid within the existing feature set of the Bitcoin protocol, they are an essential innovation to the future of Bitcoin.

I am opposed to changing the protocol as proposed by BlockStream, here’s why?
It changes the incentive structure that gives Bitcoin its value. Miners will eventually have to MM Bitcoin not for profit but for some other reason.  

Adrian, please.. why do you repeating the same mistakes all over. Sidechains are not messing with Bitcoin, they are improving it and ensuring its preservation and adaptability to future threats. The value does NOT move to other ledgers. The ledger remains the same, its token are only given more features to work with.

Only the creation of a new coin creates a new ledger and this is not the purpose of sidechains.

You keep parotting the same "it changes the incentive structure". In reality, it improves the incentive structure for miners who are no more dependent on ONE chain. They now have a whole ecosystem of interconnected chains that are each valued for their particular characteristics. The mother chain being BTC's, it is the least likely to be abandoned

This one is amazing.  
Practically every other sentence contradicts each other.

instead of doing drive bys hiding behind cryptic messages and never taking position why don't you counter argue my "contradictions"

Its going to be hard, I didn't see any contradictions. Your statement that the ledger remains the same is accurate, coins transfered to a SC are the same as coins transfered to an address. In both cases there is still one ledger, the mechanics may be different but its still one ledger. Its quite obvious they don't understand both the tech or the economic implications.

"There is one ledger"
Is untrue if (as it appears) you are referring to the side chain and Bitcoin, and true only if you are referring only to Bitcoin.
Each side chain has its own ledger, its own block chain.
Understanding side chains is much easier than understanding your descriptions of them. 

[NewLiberty]

who here has gone thru the math in Appendix B on SPV proofs?  is it sound and how does a compact SPV proof work in practical terms?

also, what is the structure of a SC?  does it start at the same block height (328739) as Bitcoin on day 1 with a complete history going back to the genesis block or does it start at it's own Block 1 w/o a coinbase?

i assume the crypto would be the same?  ECDSA and sha256, ripemd160?

New SC starts when peg is created (bitcoins are locked). All credibility for SC is in MC.
It does not matters what crypto will SC use. (it can use any cypto)

example:
SC can create paper coupons, this coupons is backed by bitcoin. (no new coupons can be created, only by depositing more bitcoins)
 - there is not digital ledger in couponSC
 - transaction are doing exchanging coupon by hand
 - somebody is doing 2wp exchanging coupons for BTC
 - no changes to existing bitcoin protocol is needed.

Some people in africa may find this useful. There is no way paper coupons can affect your bitcoins.
Only users of paper coupons take risk if they exchange this coupons for BTC they already owned and locked in MC.

Again "It does not matters what crypto will SC use. "

Yes... it does matter.
If a SC uses a compromised crypto, say one that incorporates key escrow, then the one with the escrowed keys can redeem the bitcoin that have been sent to the side chain.
Advocating for blind trust of all SC just on the merits that they are SC, is not a service to your readers.

[Dusty]

I think you should just stop advocating for side chains.  You are a bad spokesperson for the cause.  People will read these posts of yours and get the idea that someone is hyping SC for some nefarious purpose, because these posts of yours just don't make sense, and not even internally consistent with itself. 

I think instead brg444 did a great job answering a lot of the criticism related to sidechains.

As for myself I've some reserves on them too, but they are more about the technical side of the things, for example that the SPV proofs can work. It may and should work as advertised, but I'm not knowledgeable enough to verify all the calculations.

But if we take for granted that the math is ok (as this thread seems doing), I find the critics of this thread mostly dumb. Cypherdoc in primis seems to be completely without any clue, and I find this a bit strange.

Again, I don't know if the 2wp using SPV could work as defined, but if they to, SC would solve all the problems Bitcoin has today and guarantee his success in the way forward.

SC can save Bitcoin from competing and possibly better altcoins and give it the possibility to evolve as the market requires without requiring all Bitcoin participants to agree on every new feature that has to be added to the core protocol.

Heck, even the raise of the block limit fails to find a consensus in the Bitcoin community, and that should be an easy one.

[NewLiberty]

I think you should just stop advocating for side chains.  You are a bad spokesperson for the cause.  People will read these posts of yours and get the idea that someone is hyping SC for some nefarious purpose, because these posts of yours just don't make sense, and not even internally consistent with itself.  

I think instead brg444 did a great job answering a lot of the criticism related to sidechains.

As for myself I've some reserves on them too, but they are more about the technical side of the things, for example that the SPV proofs can work. It may and should work as advertised, but I'm not knowledgeable enough to verify all the calculations.

But if we take for granted that the math is ok (as this thread seems doing), I find the critics of this thread mostly dumb. Cypherdoc in primis seems to be completely without any clue, and I find this a bit strange.

Again, I don't know if the 2wp using SPV could work as defined, but if they to, SC would solve all the problems Bitcoin has today and guarantee his success in the way forward.

SC can save Bitcoin from competing and possibly better altcoins and give it the possibility to evolve as the market requires without requiring all Bitcoin participants to agree on every new feature that has to be added to the core protocol.

Heck, even the raise of the block limit fails to find a consensus in the Bitcoin community, and that should be an easy one.

ugh.

Worse than snake-oil peddlers.

You should have ended that particular sentence with the first phrase.

The problem that you share with brg444 is that you not only make claims which are unsubstantiated and too grand, you also encourage discounting of reasonable risks and concerns.  This "answers" criticism without explaining it, which should not be your goal if you are looking for agreement with your position.

[Odalv]

who here has gone thru the math in Appendix B on SPV proofs?  is it sound and how does a compact SPV proof work in practical terms?

also, what is the structure of a SC?  does it start at the same block height (328739) as Bitcoin on day 1 with a complete history going back to the genesis block or does it start at it's own Block 1 w/o a coinbase?

i assume the crypto would be the same?  ECDSA and sha256, ripemd160?

New SC starts when peg is created (bitcoins are locked). All credibility for SC is in MC.
It does not matters what crypto will SC use. (it can use any cypto)

example:
SC can create paper coupons, this coupons is backed by bitcoin. (no new coupons can be created, only by depositing more bitcoins)
 - there is not digital ledger in couponSC
 - transaction are doing exchanging coupon by hand
 - somebody is doing 2wp exchanging coupons for BTC
 - no changes to existing bitcoin protocol is needed.

Some people in africa may find this useful. There is no way paper coupons can affect your bitcoins.
Only users of paper coupons take risk if they exchange this coupons for BTC they already owned and locked in MC.

Again "It does not matters what crypto will SC use. "

Yes... it does matter.
If a SC uses a compromised crypto, say one that incorporates key escrow, then the one with the escrowed keys can redeem the bitcoin that have been sent to the side chain.
Advocating for blind trust of all SC just on the merits that they are SC, is not a service to your readers.

There are 2 different things. 2wp(escrow), and side-blockchain crypto

[NewLiberty]

who here has gone thru the math in Appendix B on SPV proofs?  is it sound and how does a compact SPV proof work in practical terms?

also, what is the structure of a SC?  does it start at the same block height (328739) as Bitcoin on day 1 with a complete history going back to the genesis block or does it start at it's own Block 1 w/o a coinbase?

i assume the crypto would be the same?  ECDSA and sha256, ripemd160?

New SC starts when peg is created (bitcoins are locked). All credibility for SC is in MC.
It does not matters what crypto will SC use. (it can use any cypto)

example:
SC can create paper coupons, this coupons is backed by bitcoin. (no new coupons can be created, only by depositing more bitcoins)
 - there is not digital ledger in couponSC
 - transaction are doing exchanging coupon by hand
 - somebody is doing 2wp exchanging coupons for BTC
 - no changes to existing bitcoin protocol is needed.

Some people in africa may find this useful. There is no way paper coupons can affect your bitcoins.
Only users of paper coupons take risk if they exchange this coupons for BTC they already owned and locked in MC.

Again "It does not matters what crypto will SC use. "

Yes... it does matter.
If a SC uses a compromised crypto, say one that incorporates key escrow, then the one with the escrowed keys can redeem the bitcoin that have been sent to the side chain.
Advocating for blind trust of all SC just on the merits that they are SC, is not a service to your readers.

There are 2 different things. 2wp(escrow), and side-blockchain crypto

LOL, of course the notion of 2wp and the cryptography used to accomplish it are different things.  That is however orthagonal to the point that the cryptography used to accomplish it does matter, it matters quite a bit.

Here are some simple ways that it matters, there are many others.
1) It is either compatible with the ASICs used for MC mining, or not (this matters for merge mining potential).
2) It is either using a key escrow or not (this would allow the initiator of the side chain to seize any of the side chain that doesn't comply with its rules - like the govSC discussed earlier).
3) It is either a well established cryptographc algorithm or not.
4) The algorithm uses cryptographic primitives which are either compromised or not.
5) The algorithm is either conducive to a PoW structure, or not.

If what you mean by "it doesn't matter what crypto SC will use" is that SC can use any crypto, good bad or ugly, then we agree.  I would just suggest that it does matter whether the crypto is good bad or ugly.

[Dusty]

You should have ended that particular sentence with the first phrase.

I can't understand what you mean.

The problem that you share with brg444 is that you not only make claims which are unsubstantiated and too grand, you also encourage discounting of reasonable risks and concerns.  This "answers" criticism without explaining it, which should not be your goal if you are looking for agreement with your position.

I try to use high-level reasoning, for example giving for granted that making "trustless 2wp" is possible (we can't be completely sure, for now).

So, looking at the cryptomoney ecosystem I see that Bitcoin has a clear advantage to any other coin, mainly due to network effect and infrastructure built around it, and that's good.

Bute there are a lot of new coins coming out, and apart from some stupid copycats (most of them), some innovation is being done in the field.

I don't want to have 10 or even only 3 different coins which share the market (and hence bitcoin capitalisation and liquidity), each one filling some gap that bitcoin can't cover (or that it does badly), I would prefer Bitcoin to be "the perfect money".

Now, we know we need to be very, very conservative on the changes to the core protocol because the possibility of breakage, even when minuscule, can cause enormous problems, so we need to research and thoroughly test new ideas before they can be imported in Bitcoin.

Also, almost everyone agrees on the fact that Bitcoin development is too centralized, with a few actors having much greater role of any others in pushing some set of changes.

So, the only way left are lobbying the developers (and we don't want that), or creating completely new altcoins that has to compete with Bitcoin and anyway take liquidity and market cap from it.
Also, even if remote, there is the risk that one of these altcoin, if backed by a big corp like amazon, apple, microsoft & C could really be a Bitcoin competitor in the future: Bitcoin actual market cap is tiny even compared to the size of one the big player market cap.

How to permit innovation in Bitcoin land without some small group of people could veto them for whatever reason it is?
And for innovation in Bitcoin I mean for example: better anonimity, higher TPS, better security, more decentralized mining, and certainly NOT the raising on the maxmimum number of existing bitcoin units and their distribution.

I think that SC can solve this problem: it mantains what is the good of bitcoin (cap on the coins, their distribution and security for who does not want to use new features) and enable permissionless innovation for everybody who want to give it a try.

If a SC which is completely better than Bitcoin under every aspect can arise, so be it: that will be a better money for everybody, and it can grow up bit by bit without disrupting bitcoin market, infrastructure and its market cap.
Alternatively, a SC which is better than Bitcoin under only some aspects and not all of them will give more value to the whole ecosystem without any drawback: only who is interested in it uses it without taking anything to any other.

I'm unable to envision a way for a SC to destroy Bitcoin, except for the case that we already knows: altcoins.

Every time I read cypherdoc on the subject I'm unable to understand the kind of threat he sees, and it seems to me simply that he is missing the point of what a 2wp gives us.

I'll continue to read the thread with interest to better understand these kind of scenarios, if any, I thank everybody for their contribution to the matter.

[cypherdoc]

The better question is what is the use case for a paypal chain?

Paypal is used to send money over the world. Bitcoin does that natively so honestly I don't see it.

How about: cheaper transactions or faster confirmations than on the blockchain?

I have some BTC.  Rather than go through Coinbase to get fiat then do another ACH to charge my Paypal account, I would just peg some BTC on the Paypal sidechain.  I would expect to be able to use my paypalcoin to charge my paypal account, or to convert back into BTC as I saw fit.

Paypal is an interesting case because it is one where I could see Blockstream making some money.  I would never trust Paypal for privacy or anything like that.  As always, I would use them for what I needed and not use them for anything else.  I'm not all that worried about them running off with my coins because they are mainstream and I could sue their ass so that's not a big issue.  For these reasons I don't really mind if their sidechain is closed-source, but I do want to know that they've done things at least a little bit right.  If they commissioned Blockstream to do the work and produce the binaries, that would be enough for me to trust the binaries to the limited extent that I need to in order to use their service.

This scenario seems needlessly complex right now: it would be far simpler (and would drive adoption) if ebay vendors directly accepted BTC. But down the road tx fees will likely be relatively heftier, and use cases for microtransactions greater.  SCs are presented as a possible solution to these issues. What (trustless) alternatives do the SC skeptics propose?

wouldn't an exit of miners to SC's help the Blockstream business model?

[NewLiberty]

You should have ended that particular sentence with the first phrase.

I can't understand what you mean.

Your statement:

Again, I don't know if the 2wp using SPV could work as defined, but if they to, SC would solve all the problems Bitcoin has today and guarantee his success in the way forward.

Side chains per se, do not solve all the problems Bitcoin has today, nor are they a guarantee of anything.
What they are is a mechanism.  They may have the potential to solve problems.  That will depend entirely on what people do with them.  They are another tool in the tool belt.  It can be used to build or destroy.  The existence of this mechanism does not guarantee the success of Bitcoin.  It would be nice if it did, and we could all just sit back and wait for the magic to happen.

Instead there is a new tool, a new mechanism.  It may be used by all sorts of people, and groups.  This is great, it is the nature of open source collaboration.  However we must recognize that only some people may share common goals with you or me, and others may not.  And you may not know whether any particular SC creator does or doesn't.  There may be wolves in alpaca clothing.

These are the sorts of things that I (and presumably CypherDoc and others) consider with caution.  What makes this even more of a concern is when we see these posts that essentially say "there is nothing to worry about", "this fixes everything" or "the details of the cryptography don't matter".
Those sort of statements are either (a) just misunderstood word choices (and something else was meant by the author), or (b) maybe the author is simply misguided or exuberant , or (c) perhaps they may be malicious attempts to misguide others.

If it is (a) it tends to get more clear with some attention.  If (b) it is worrisome that there are going to be coming disappointments when the hoped for effects don't materialize, and (c) is just expected and is dealt with in much the same way as (a). 


What you wrote here below is sensible.  We may disagree on some matters of preference, but I like that you say what side chains "can" do rather than what they "will" do.  It is important to understand that they can be used and also can be abused.  I think Cypherdoc is understanding the function and capabilities pretty well.  I also think his caution is reasonable.  Some SC may be great and solve some problems...And I think that there will be some SC that end up costing some people a LOT of their hard earned bitcoin due to fraud, misrepresentation, and blind trust.  So when I see folks saying "everything is great, Side Chains are here to save us" type stuff, all the red flags go up.

I try to use high-level reasoning, for example giving for granted that making "trustless 2wp" is possible (we can't be completely sure, for now).

So, looking at the cryptomoney ecosystem I see that Bitcoin has a clear advantage to any other coin, mainly due to network effect and infrastructure built around it, and that's good.

But there are a lot of new coins coming out, and apart from some stupid copycats (most of them), some innovation is being done in the field.

I don't want to have 10 or even only 3 different coins which share the market (and hence bitcoin capitalisation and liquidity), each one filling some gap that bitcoin can't cover (or that it does badly), I would prefer Bitcoin to be "the perfect money".

Now, we know we need to be very, very conservative on the changes to the core protocol because the possibility of breakage, even when minuscule, can cause enormous problems, so we need to research and thoroughly test new ideas before they can be imported in Bitcoin.

Also, almost everyone agrees on the fact that Bitcoin development is too centralized, with a few actors having much greater role of any others in pushing some set of changes.

So, the only way left are lobbying the developers (and we don't want that), or creating completely new altcoins that has to compete with Bitcoin and anyway take liquidity and market cap from it.
Also, even if remote, there is the risk that one of these altcoin, if backed by a big corp like amazon, apple, microsoft & C could really be a Bitcoin competitor in the future: Bitcoin actual market cap is tiny even compared to the size of one the big player market cap.

How to permit innovation in Bitcoin land without some small group of people could veto them for whatever reason it is?
And for innovation in Bitcoin I mean for example: better anonymity, higher TPS, better security, more decentralized mining, and certainly NOT the raising on the maximum number of existing bitcoin units and their distribution.

I think that SC can solve this problem: it maintains what is the good of bitcoin (cap on the coins, their distribution and security for who does not want to use new features) and enable permissionless innovation for everybody who want to give it a try.

If a SC which is completely better than Bitcoin under every aspect can arise, so be it: that will be a better money for everybody, and it can grow up bit by bit without disrupting bitcoin market, infrastructure and its market cap.
Alternatively, a SC which is better than Bitcoin under only some aspects and not all of them will give more value to the whole ecosystem without any drawback: only who is interested in it uses it without taking anything to any other.

I'm unable to envision a way for a SC to destroy Bitcoin, except for the case that we already knows: altcoins.

Every time I read cypherdoc on the subject I'm unable to understand the kind of threat he sees, and it seems to me simply that he is missing the point of what a 2wp gives us.

I'll continue to read the thread with interest to better understand these kind of scenarios, if any, I thank everybody for their contribution to the matter.

[Odalv]

who here has gone thru the math in Appendix B on SPV proofs?  is it sound and how does a compact SPV proof work in practical terms?

also, what is the structure of a SC?  does it start at the same block height (328739) as Bitcoin on day 1 with a complete history going back to the genesis block or does it start at it's own Block 1 w/o a coinbase?

i assume the crypto would be the same?  ECDSA and sha256, ripemd160?

New SC starts when peg is created (bitcoins are locked). All credibility for SC is in MC.
It does not matters what crypto will SC use. (it can use any cypto)

example:
SC can create paper coupons, this coupons is backed by bitcoin. (no new coupons can be created, only by depositing more bitcoins)
 - there is not digital ledger in couponSC
 - transaction are doing exchanging coupon by hand
 - somebody is doing 2wp exchanging coupons for BTC
 - no changes to existing bitcoin protocol is needed.

Some people in africa may find this useful. There is no way paper coupons can affect your bitcoins.
Only users of paper coupons take risk if they exchange this coupons for BTC they already owned and locked in MC.

Again "It does not matters what crypto will SC use. "

Yes... it does matter.
If a SC uses a compromised crypto, say one that incorporates key escrow, then the one with the escrowed keys can redeem the bitcoin that have been sent to the side chain.
Advocating for blind trust of all SC just on the merits that they are SC, is not a service to your readers.

There are 2 different things. 2wp(escrow), and side-blockchain crypto

LOL, of course the notion of 2wp and the cryptography used to accomplish it are different things.  That is however orthagonal to the point that the cryptography used to accomplish it does matter, it matters quite a bit.

Here are some simple ways that it matters, there are many others.
1) It is either compatible with the ASICs used for MC mining, or not (this matters for merge mining potential).

I can use any crypto, even no crypto :-) eg.  chain or tree of hashes + hashing oracle
Then I can use last/root-hash and ask MC to timestamp for fees => side side-chain block was mined and No MM is needed.

2) It is either using a key escrow or not (this would allow the initiator of the side chain to seize any of the side chain that doesn't comply with its rules - like the govSC discussed earlier).

this is 2wp ->
 - it can be single entity like Mark Karppeles :-)
 - or it can be created using multisig (functionaries). see "Appendix A  Fedearted Peg".  Some functionaries can be Human (They have power of brain), some functionaries  can be software who can annalyse sidechain
 - or it can be Bitcoin with OP_SIDECHAINPROOFVERIFY

3) It is either a well established cryptographc algorithm or not.
4) The algorithm uses cryptographic primitives which are either compromised or not.
5) The algorithm is either conducive to a PoW structure, or not.

If what you mean by "it doesn't matter what crypto SC will use" is that SC can use any crypto, good bad or ugly, then we agree.  I would just suggest that it does matter whether the crypto is good bad or ugly.

If sidechain is not safe enough then I'll not use it.
But we can build safe SC and "it doesn't matter what crypto SC will use"  b/c it depends what SC will do. It can be Exchange, WebWallet .. Circle

Exchange will not own Bitcoin. Btc are in escrow by 2wp. This can be different party who is able to verify Exchange SPV proof.

[NewLiberty]

....

Then we agree.
Side chains accommodate arbitrary crypto (good bad or ugly) and which crypto is used for a particular chain matters.

[notme]

....

Then we agree.
Side chains accommodate arbitrary crypto (good bad or ugly) and which crypto is used for a particular chain matters.

It is my understanding that while the transactions can use arbitrary crypto, block hashing would be limited to sha256 (or possibly a small list of others).  In order to ensure a malicious attacker can not simply lie, the bitcoin miners supporting SPV proofs will need to verify the block hash is valid for the headers provided.  The transaction's details that destroy the pegged coin and unlock the bitcoin will be used, but the signature can be trusted since it is in the block with the highest amount of work.  If nobody presents a higher difficulty block header that contains a contradicting transaction within the contest period, the bitcoins unlock.  But, to verify all this, the miners must be able to hash the headers.

[brg444]

Its pretty exhausting because it is difficult to determine what you are trying to communicate.
This post in particular is merely self contradictory rhetoric.  It doesn't contain any reasoned arguments.
Parse it yourself and you will see...

Either (a) side chains have no capability to "mess with" Bitcoin, or (b) they are empowered to improve, ensure preservation, and adaptability...  

Then, you claim to know the purpose of side chains.  As if there is only one purpose that *the people* that create side chains can have.  This is an outlandishly impossible claim to make.

Followed by another self contradiction.  Either (a) side chains do not change the incentive structure, or (b) they improve it.  Both of these can not be true.


I think you should just stop advocating for side chains.  You are a bad spokesperson for the cause.  People will read these posts of yours and get the idea that someone is hyping SC for some nefarious purpose, because these posts of yours just don't make sense, and not even internally consistent with itself.  

I knew this would be your argument, and yes, I can see how it might sound contradictory.

Adrian's use of those terms, "mess with" and "change", were made in a notably pejorative way. My point is that these changes are, IMO, for the better. Someone could have a different opinion but while you accuse me of not making sense, the same could be said of much of the arguments made against SC so far in this thread.

[brg444]

Its pretty exhausting because it is difficult to determine what you are trying to communicate.
This post in particular is merely self contradictory rhetoric.  It doesn't contain any reasoned arguments.
Parse it yourself and you will see...

Either (a) side chains have no capability to "mess with" Bitcoin, or (b) they are empowered to improve, ensure preservation, and adaptability...  

Then, you claim to know the purpose of side chains.  As if there is only one purpose that *the people* that create side chains can have.  This is an outlandishly impossible claim to make.

Followed by another self contradiction.  Either (a) side chains do not change the incentive structure, or (b) they improve it.  Both of these can not be true.


I think you should just stop advocating for side chains.  You are a bad spokesperson for the cause.  People will read these posts of yours and get the idea that someone is hyping SC for some nefarious purpose, because these posts of yours just don't make sense, and not even internally consistent with itself.  

And yes, of course I can proclaim to know the purpose of sidechain.

It is perfectly obvious to anyone who has taken some time to study them and observe what they enable and what they don't. It is simple deduction using the premise that altcoins existed before sidechains therefore sidechains did not come about to enable altcoins.

[brg444]

"There is one ledger"
Is untrue if (as it appears) you are referring to the side chain and Bitcoin, and true only if you are referring only to Bitcoin.
Each side chain has its own ledger, its own block chain.
Understanding side chains is much easier than understanding your descriptions of them. 

"There is one ledger to rule them all" is, I believe, the correct statement. Yes, sidechains create sub-ledgers but their scarcity is dependent upon Bitcoin's

[brg444]

The problem that you share with brg444 is that you not only make claims which are unsubstantiated and too grand, you also encourage discounting of reasonable risks and concerns.  This "answers" criticism without explaining it, which should not be your goal if you are looking for agreement with your position.

You do realise that most if not everyone of the concerns put forward by SC opponents in this thread can be qualified as "unsubstantiated and too grand"?

I'm sorry but all myself, and some others, in this thread have been doing is encourage discounting unreasonable risks and concerns

[brg444]

LOL, of course the notion of 2wp and the cryptography used to accomplish it are different things.  That is however orthagonal to the point that the cryptography used to accomplish it does matter, it matters quite a bit.

Here are some simple ways that it matters, there are many others.
1) It is either compatible with the ASICs used for MC mining, or not (this matters for merge mining potential).
2) It is either using a key escrow or not (this would allow the initiator of the side chain to seize any of the side chain that doesn't comply with its rules - like the govSC discussed earlier).
3) It is either a well established cryptographc algorithm or not.
4) The algorithm uses cryptographic primitives which are either compromised or not.
5) The algorithm is either conducive to a PoW structure, or not.

If what you mean by "it doesn't matter what crypto SC will use" is that SC can use any crypto, good bad or ugly, then we agree.  I would just suggest that it does matter whether the crypto is good bad or ugly.

This is so obvious to anyone reading this thread I'm not sure why it deserves to be mentioned.

Did you somehow think it escaped us that some SC could be used for nefarious purposes? That we believe ALL SC should be trusted?

[cypherdoc]

....

Then we agree.
Side chains accommodate arbitrary crypto (good bad or ugly) and which crypto is used for a particular chain matters.

It is my understanding that while the transactions can use arbitrary crypto, block hashing would be limited to sha256 (or possibly a small list of others).  In order to ensure a malicious attacker can not simply lie, the bitcoin miners supporting SPV proofs will need to verify the block hash is valid for the headers provided.  The transaction's details that destroy the pegged coin and unlock the bitcoin will be used, but the signature can be trusted since it is in the block with the highest amount of work.  If nobody presents a higher difficulty block header that contains a contradicting transaction within the contest period, the bitcoins unlock.  But, to verify all this, the miners must be able to hash the headers.

Is  it possible for attackers to do this in reverse?

Take someone's cold wallet and lock them into an SPVPROOF on a SC while the true owner is indisposed for some reason? Or is this impossible because they would need the private keys to begin with? 

[Cortex7]

My Noob Questions:

Say a sidechain were created for paypal:

Would paypal have to buy existing coins and move them to sidechain?

When in that sidechain these coins would have same fiat price as existing chain coins?

The better question is what is the use case for a paypal chain?

Paypal is used to send money over the world. Bitcoin does that natively so honestly I don't see it.

I think a corp of that size could build a "buyer protection" scheme, just as they do for fiat now. It would work like this:

Merchants have to register with paypal, photo ID, prooof of address, bank account info etc.

Buyers can contest trades, and will get refund if they can prove non delivery or defective goods etc.

Paypal instantly refunds buyer and then collects off seller by taking coin/fiat from account or if none then suspending account.

Why would a sidechain be needed for this? Maybe it wouldn't but paypal might want to have extra features giving an element of central control to the new blockchain, like each transaction is multisig and they always have a needed key. Pure speculation on my part here.

But regardless of paypal I am still interested to know if existing coin debasement can occur through SC.

[Cortex7]

geezuz crimony.  i actually AM starting to feel bad...

Maybe this will lessen the bad... hmmmm... maybe not