Gold collapsing. Bitcoin UP.

[cypherdoc]

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

Sounds like we have a core dev in our midst. 

[Odalv]

....

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? 

The only safe cold wallet is in MC. And bitcoin cannot be moved to SPVPROOF bitcoin address without private key.

[brg444]

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.

The problem that me, and seemingly a couple others, have with Cypherdoc's concerns is that most of them boil down to the creation of altcoins, something that sidechains did not introduce and do little to enable. I hope you have come to understand this part because the accusation that you make of SC proponents being "unreasonable" can equally be applied to most, if not all, of the SC opponents in this thread.

You seem to be a reasonable person who has a great ability to distill his ideas in thoughtful and concise manners. Maybe you want to share with us notable weaknesses of the 2wp and what considerable risks you can foresee?

[cypherdoc]

We're going UP.

Last chance to get in the train.

[brg444]

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

Sounds like we have a core dev in our midst. 

 



I think the obvious technical shortcomings I have displayed in this thread suggest this other brain fart of yours is not quite likely

[Cortex7]

We're going UP.

Last chance to get in the train.

I think that ~1% upward jolt a few minutes ago originated from ~1500 alot of BTC being market order purchased on BTC china.
All other exchanges arb bots went yummy spanning a few mins later. BTCe only did a small amount of the arb.

Yes get on the train, good chance of departure anytime now.

[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.

notme, you're into math.  you've looked at the SPV proof.  i take it you're satisfied.

can you distill it down for us non maths as to how it works and why we should take comfort?

[cypherdoc]

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

Sounds like we have a core dev in our midst. 

 



I think the obvious technical shortcomings I have displayed in this thread suggest this other brain fart of yours is not quite likely

We, we, Senor!!!

[brg444]

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

Sounds like we have a core dev in our midst. 

 



I think the obvious technical shortcomings I have displayed in this thread suggest this other brain fart of yours is not quite likely

We, we, Senor!!!

as in : we, the proponents of SC.

[79b79aa8d5047da6d3XX]

I think the obvious technical shortcomings I have displayed in this thread suggest this other brain fart of yours is not quite likely

boys, boys ... we are all just trying to tease out the pros and cons of SCs, let's keep it productive.

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

it is a good reflex to persistently ask cui bono. but as brg444 has argued, and as seems straightforward, this is not a great concern. the existence of any SC depends on the integrity of the MC. so in principle SCs do not incentivize abandonment of MC mining.

looking far into the future, when there is no block reward and all miner revenue comes from tx fees, adrian-x foresees a possibility in which SC mining could be more profitable than MC mining, which might start to provide incentive to devote more hashing resources to SCs than to the MC.

but is this worry not supposed to be addressed by the fact that miners of SCs have every reason to merge mine with the MC?

[cypherdoc]

I think the obvious technical shortcomings I have displayed in this thread suggest this other brain fart of yours is not quite likely

boys, boys ... we are all just trying to tease out the pros and cons of SCs, let's keep it productive.

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

it is a good reflex to persistently ask cui bono. but as brg444 has argued, and as seems straightforward, this is not a great concern. the existence of any SC depends on the integrity of the MC. so in principle SCs do not incentivize abandonment of MC mining.

looking far into the future, when there is no block reward and all miner revenue comes from tx fees, adrian-x foresees a possibility in which SC mining could be more profitable than MC mining, which might start to provide incentive to devote more hashing resources to SCs than to the MC.

but is this worry not supposed to be addressed by the fact that miners of SCs have every reason to merge mine with the MC?

MM can only be expected to be a % of whichever is MC.  like Namecoin, approx 70% of MC hashing.  so more vulnerable.

[cypherdoc]

keep buying.

[brg444]

MM can only be expected to be a % of whichever is MC.  like Namecoin, approx 70% of MC hashing.  so more vulnerable.

Again, I disagree, there is little incentive for miners to MM Namecoin.

If we expect that a significant amount of txs are processed on SC then there will be an incentive for the majority of the miners to MM them.

[79b79aa8d5047da6d3XX]

MM can only be expected to be a % of whichever is MC.  like Namecoin, approx 70% of MC hashing.  so more vulnerable.

good, so even in that possible future scenario in which merged SC/MC mining is more profitable, MC hashrate would still be greater. and if SC miners undercut that, they undermine their own sidechain. subsidizing the blockchain is a price they have to pay.

niet?

[cypherdoc]

MM can only be expected to be a % of whichever is MC.  like Namecoin, approx 70% of MC hashing.  so more vulnerable.

Again, I disagree, there is little incentive for miners to MM Namecoin.

that's funny. then why do i and 70% of hashing power on the network "do" it?

If we expect that a significant amount of txs are processed on SC then there will be an incentive for the majority of the miners to MM them.

yes, but he was saying if a SC becomes the MC, miners would MM Bitcoin. maybe so, i'm just saying that Bitcoin would then be less secure as it would only have a % of the total hashrate.

[Odalv]

MM can only be expected to be a % of whichever is MC.  like Namecoin, approx 70% of MC hashing.  so more vulnerable.

Again, I disagree, there is little incentive for miners to MM Namecoin.

that's funny. then why do i and 70% of hashing power on the network "do" it?

If we expect that a significant amount of txs are processed on SC then there will be an incentive for the majority of the miners to MM them.

yes, but he was saying if a SC becomes the MC, miners would MM Bitcoin. maybe so, i'm just saying that Bitcoin would then be less secure as it would only have a % of the total hashrate.

Namecoin is ALTCOIN it does not have its own BTC locked in MC.

SC is not ALTCOIN.  SC starts in MC and continues. If MC is disolved then SC is too.

[Zangelbert Bingledack]

Hi all,

The following snippet by JR had me thinking for a few days about the blocksize debate and how it relates to sidechains, while reading the extensive back and forth between sidechain supporters and opponents here. I believe I have an answer, but it overturns some of the conventional wisdom.

Bitcoin could never survive as a high-fee settlement currency because high fees would arise due to block size rationing, not because transactions should naturally cost that much for technical reasons. Bitcoin would lose out to a competing currency with less/no rationing that would be less expensive to use for settlements.

High transaction rates on the main chain are the only way for Bitcoin to survive. Yes, getting there is a difficult technical problem to solve. Deal with it.

First of all, in a future where trillions of dollars' worth are transacted on the network, a 51% attack has to cost on the order of billions at least for good security. When the block reward ceases to fund miners enough to make a 51% attack cost billions, total revenue from transaction fees will have to be around that high to maintain security. But, as JR implies, tx fees will tend to fall to the actual marginal cost of including them in a block, which makes it seem near impossible for the revenue to be enough. After all, if Bitcoin devs choose to artificially limit block sizes as a handout to miners in lieu of the block reward, another coin that charges lower fees will eventually take its place...

...but no, this isn't quite right. Because somehow or other, a PoW network where trillions of dollars are securely transacted has to have plenty of mining to thwart 51% attacks, and in order to do that there must be a hefty incentive for miners to keep mining. That means a competing coin can only steal Bitcoin's thunder with lower tx fees if it retains high block rewards - and in the long run it must be like Dogecoin, retaining constant, non-decreasing block rewards, in order to continue funding miners enough to secure the trillion-dollar network.

In other words, besides the dynamics of who pays (just the transactors, or every holder), the block rewards and the tx fees (and hence the blocksize limits) are two sides of the same coin: they're both ways of paying the miners, with the aim of ensuring the miners get enough to keep the network secure.

Since it cannot be known in advance how popular Bitcoin will ultimately be, nor how big the world economy may grow over the next hundred years under Bitcoin, it doesn't makes sense to go the Dogecoin route of perpetual inflation. The block reward is deemed sacred by investors so should not be altered. That ultimately leaves only transaction fees to be adjusted in line with the volume of transactions vs. the cost of securing the network. Who will adjust the fees? Of course the market, finally, but who will put a floor on the fees to ensure miners are getting paid enough? Rationing, as it were, but by the market. Perhaps there is a way to tie it to market conditions directly, or perhaps devs will simply release different versions with different max_blocksizes and see what the economic majority goes for. Either way, it is being left to the market. It is not centrally planned rationing, but market rationing, whether directly or indirectly. It is not like government rationing food or apartments, any more than Bitcoin's 21M coin limit and block reward schedule is.

Therefore I believe blocksize limits will increase, but not without bound. Any coin that tries to increase the blocksize limits without bound, in an attempt to undercut Bitcoin's transaction fees, will have to do that by having - at that point in time - a larger block reward, punishing savers a little more and spenders a little less. There is not free lunch. In the end the same tax is being paid from the users of the network to the miners. Any chain that tries to undercut on both aspects will be undersecured, not to mention the network effect making this whole undertaking difficult in the first place. The network effect makes is so the market or economic majority can mess up its guestimates quite a bit and still retain Bitcoin's dominance.

Nevertheless, this means that if most of the transactions are happening on sidechains the Bitcoin network could become grossly undersecured after a few more halvenings. Which suggests that ultimately paying miners with transaction fees for a ledger network that is designed, above all else, to store the value of its ledger is a bad idea, since the transactions can be moved off the network. The transactions are not something that must happen on the network, as sidechains make clear. Paying miners with tx fees thus fails to tether the service miners perform to the payment they receive.

As uncomfortable a prospect as this is, perhaps endless inflation like Dogecoin really is the answer, maybe with hardforks every few decades deciding on new inflation schedules that the economic majority prefers. The 21M coin limit is sacred to me, yet I have to admit it is meaningless if you have to pay a hefty fee to do anything with the bitcoins you own. What difference does it really make, as a hodler, if you lose 1% to inflation over 21M coins vs. losing 1% to transaction fees when you spend? In the end what matters is that there is no central authority dictating the inflation rate for political whim, and hence it will be very low, just as tx fees will be very low. Ultimately that rate, and hence the "tax" going to the miners (whether by inflation or tx fees), is determined by the market.

TL;DR: Sidechains (if they succeed) force Bitcoin's hand, although decades in the future, in setting an inflation rate determined by the market, in order to tie miner's subsidies more exactly to the primary service they perform: that of securing Bitcoin's store of value. This is because successful sidechains would allow Bitcoin transactions to be disconnected from Bitcoin miners. Bitcoin therefore could not rely on transaction fees for its network security incentives. Sidechains would have made it clear that transaction functionality is not intrinsic to or inseparable from the Bitcoin network; only the store of value function is, and therefore miners must be continually rewarded for maintaining this function alone, for the lifetime the network.

[Odalv]

that's funny. then why do i and 70% of hashing power on the network "do" it?

Did not you tell us that you have no investment in altCoins.

[cypherdoc]

that's funny. then why do i and 70% of hashing power on the network "do" it?

Did not you tell us that you have no investment in altCoins.

Namecoin is not an altcoin in my book.

it's more of a public service for a public good that's been around since day 1.  also, BTCGuild where i now pool, does this by default.  i just found this out about 3 mo ago as it was a setting i had to turn on in their control panel to view.  voila!  i had some NMC i didn't even know about!  sure, i'll take it.

[brg444]

that's funny. then why do i and 70% of hashing power on the network "do" it?

I don't know, you will have to answer that. I assume because it is trivial to do so. If you could pull profit out of it don't you think that even more people would be doing it?

yes, but he was saying if a SC becomes the MC, miners would MM Bitcoin. maybe so, i'm just saying that Bitcoin would then be less secure as it would only have a % of the total hashrate.

Not necessarily, if SC creates an incentive for miners to mine them (txs) then it is perfectly reasonable to assume that maybe 100% of the miners would MM them.

With sidechains, the mining revenue pie is now split between different chains. As a miner, would you choose to mine only a slice of the pie or MM all of the slices. I think the answer goes without saying.