Gold collapsing. Bitcoin UP.

[brg444]

We can add a little more complexity.  Maybe this will help...

 MC
 |   \
SC₁ SC₃
 |   /
SC₂

So now SC₂ has coins from MC derived through both SC₁ and SC₃, but SC₁ is a dead chain and will no longer support SPV back to MC (say for sake of discussion that devs can inflate at will and syphon off any that get SPV'd back from SC₂ so no one will ever do it).

SC₂ is still an active and tradable asset with MC

How many ledgers do we have?
Is this a new risk or is there another way to do this without Side Chains?

(There is a lot more complexity that can be added.)  Some economists would suggest that complexity is itself a risk, so any new "feature" would potentially add this sort of risk in the amount that the new features are useful or powerful.

Of course I understand all of your proposed scenario. My argument is the risk resides in leaving MC. When that decision is taken then yes complexity can be added through the use of sidechains. The risk is not new, the scheme is.

If you want to prove me wrong then please explain how it would be more damageable to the user and/or Bitcoin if the coins are lost through an elaborated sidechain scheme than on a convential off-chain platform (MtGox style)

[brg444]

I guess you guys' point is that sidechains could eventually create a propensity for coins to move off the mainchain and that this in itself is an increase in risk... While I believe the concern to be fair, my opinion is this is inevitable, sidechain or not.

The choice we are presented with is whether we'd like for this to happen on more centralized, 3rd party controlled platforms or through the use of more decentralized, well designed and properly implemented sidechains.

[ssmc2]

Hi guys, I was told there was gold talk in this thread?

[brg444]

Hi guys, I was told there was gold talk in this thread?

wrong door, this is now Sidechain UP. Bitcoin down 

[smooth]

If you want to prove me wrong then please explain how it would be more damageable to the user and/or Bitcoin if the coins are lost through an elaborated sidechain scheme than on a convential off-chain platform (MtGox style)

Perhaps because that risk is simply better understood, or at least, easier to understand. With a complex web of interconnected side chains it is conceivable you may have a system that no one understands.

[brg444]

If you want to prove me wrong then please explain how it would be more damageable to the user and/or Bitcoin if the coins are lost through an elaborated sidechain scheme than on a convential off-chain platform (MtGox style)

Perhaps because that risk is simply better understood, or at least, easier to understand. With a complex web of interconnected side chains it is conceivable you may have a system that no one understands.

Fair point.

But again, what exactly is the need for such "complex web of interconnected side chains"?

Sure enough I can envision this happening in the future but if it does happen then it,s because they are needed to support certain services. If a need for these services exist then is the alternative that we should expect "complex web of interconnected off-chain platforms" not true as well?

[cypherdoc]

If you want to prove me wrong then please explain how it would be more damageable to the user and/or Bitcoin if the coins are lost through an elaborated sidechain scheme than on a convential off-chain platform (MtGox style)

Perhaps because that risk is simply better understood, or at least, easier to understand. With a complex web of interconnected side chains it is conceivable you may have a system that no one understands.

Or as Adrian has said, at least with gox MK is being held responsible, a result of him being identifiable. With a SC you might not know who to blame. In fact, Bitcoin itself may be blamed.

[smooth]

But again, what exactly is the need for such "complex web of interconnected side chains"?

Maybe none at all, but that doesn't mean people won't build it. Perhaps they will individually see a myopic need for their own little piece even though globally there is no real need. I would describe nearly the entirety if not the entirety of HFT and flash crashes in that manner.

[NewLiberty]

I guess you guys' point is that sidechains could eventually create a propensity for coins to move off the mainchain and that this in itself is an increase in risk... While I believe the concern to be fair, my opinion is this is inevitable, sidechain or not.

The choice we are presented with is whether we'd like for this to happen on more centralized, 3rd party controlled platforms or through the use of more decentralized, well designed and properly implemented sidechains.

It provides a new another way to lose coins to tradability.  Dead coins, burned.  With alts you just lose wealth, no one else is affected by that.  When SC₁ ends, coins are lost.

I don't need you to be wrong about anything, it isn't my goal to win an argument.  Counterparty did this too, and I burned bitcoin for that too knowingly.

[brg444]

Or as Adrian has said, at least with gox MK is being held responsible, a result of him being identifiable. With a SC you might not know who to blame. In fact, Bitcoin itself may be blamed.

But this does not make anything better.

People are quick to point fingers but most of the time the blame is on the user. Sure MK had his share of responsibility for what unfolded but it would've never happened if the users of Mt. Gox did not carelessly leave so many coins on a 3rd party exchange.

In a Bitcoin economy the user is responsible for his wealth and any action resulting in the movement of his coins off the mainchain must be taken with proper understanding of the underlying risks.

"with power comes great responsibility"

[sidhujag]

Maybe open another thread about sc. Just a thought.

[brg444]

^ agreed. I think everyone has stated their positions and presented their arguments. let's go back to the regular program. I, for one, will do my best not to be lured into the discussion any more.

[Erdogan]

I have a question to sidechain theory that I think deserves an answer or at least some thought. To express the question clearly, I need to define some things, and using some analogies, else things become too foggy and the question will remain unanswerable.

So we have bitcoins and the bitcoin blockchain. The nature of the coins are defined by the rules in the blockchain. A bitcoin by nature moves around visiting various bitcoin addresses, it can not leave the blockchain.

Now a sidechain is different, it must have different rules, that is the point of the sidechain to begin with. Since it is called a sidechain, it must be based on the same blockchain technology, just with other rules. So what moves around to various addresses in the sidechain, is also something different from bitcoin, and I call that a sidecoin (a word that is not used in the sidechain whitepaper).

Now the peg. A sidechain without a peg is not interesting, at best you get some sidecoins by burning an amount of bitcoin using a provable unspendable address, which we know exists. The only interesting instances of sidechains are those where you "move bitcoins over, and back again" in the words of the sidechain whitepaper authors. In the light of the preceding definitions, I think those words are misleading, the correct wording would be a bitcoin is paralyzed, parked, or neutralized for the duration when the corresponding sidecoins are in existence.

This looks very much like how the casascius coins work. As long as the physical coins exists, the bitcoin is parked at an address where nobody have the unlocking key, that is hidden inside the coin. You can open the coin, after that the physical coin stops to exist, and using the code you found inside, you can free the bitcoin and use it the normal way. The relevance of this becomes clear a few lines down, but first I want to discuss the peg.

They call it a two way peg, but the nature of the peg is always two ways. Pegging literally means to fasten things together with a wooden stick (the peg). If you think of it as prices, you can have an actor with a substantial store of both types of assets (a type of money and a type of grain for instance), they can either define a maximum price of grain (by selling grain if the price should hover over the defined price) or they can define a minimum price of grain (by buying grain should the price fall too low), or they could fix the price entirely by doing both, which is pegging.

For this question to be relevant, the only requirement is that bitcoins can be paralyzed and sidecoins created (in one operation), and the reverse, that the sidecoins are destroyed and the bitcoins vitalized in another operation. What happens with the sidecoins while they exist, doesn't matter, basically, hopefully something useful can come out of it. Heck,  the sidecoins need not be created and destroyed in those operations, it is only necessary that the paralyzed bitcoins can be revitalized.

In this way of modelling the sidechain, bitcoin and its blockchain can not be modified. If you integrate a part of the sidechain functionality into bitcoin, for instance the method to free the bitcoin, you haven't really created a new system, you have instead modified bitcoin with the new sought after functionality. So bitcoin must remain unchanged.

Using these definitions and analogies, the sidechain system must create a bitcoin address where the bitcoins are to be parked. The unlocking code must be kept, else the bitcoins can not be revitalized. You can imagine that the bitcoin unlocking code is hidden by encryption and attached to the sidechain transactions, enabling the current owner of the sidcoin to choose to "open" the sidecoin to reveal the bitcoin unlocking code. Or, you could imagine that the sidechain network could split the key to unlock the bitcoin unlocking code and distribute it to a number of sidechain participants. Anyway, when the bitcoin address is created, the unlocking code (the secret key) has to be created by a single machine with a single owner before it is hidden or split and distributed. So the question is: Is it possible to do this and at the same time prove that the original unlocking code (the secret key) is not known by anyone? Is it possible to prove that a secret exists, and that secret can be revealed, but the secret is not known by anyone?

tl;dr: Fuck off.

[Odalv]

You can also create SilkRoad 3.0 SC.

Edit:
Web site will be only used to keep offers. (it will not hold pKyes).
This SC can use Cryptonote 2.0 protocol(as Monero uses) and decentralized miners will provide 2wp.

Edit2:
Architecture

<bitcoin>
  <crypto-noteSC> - decentralized network  btc <-1:1 2wp-> scBTC
         <scBTC - asset>
         <scDrug - asset>
        <silkRoadSC-1 /> - hidden centralized server -1 same as Merger
        <silkRoadSC-2 /> - new hidden centralized server if #1 fails
   </crypto-noteSC>
</bitcoin>

i just love your imagination!  so refreshing.

great example of what will happen with SC's.  in fact, you're gonna do it.

I think, there is no need to create ANY change into current Bitcoin to create SC with decentralized 2wp. There is only 1 limitation, every transaction in SC what changes ownership in SC will require BTC transaction in MC too.  But it is not problem if you have old BTC that are locked for long enough in both chains. We can return in time if bitcoin block-chain will be our clock. I know it is too abstract, but very simple.

If you have BTC and scBTC locked for example 5000 blocks long, then we can make a lot of sidechain transaction. (count is unlimited)

Let's start:

Let A is standard bitcoin address what holds A amount of BTCs and  A' is address in SC with same amount scBTC. (and user-a hold both pKeys). And A' is only address in SC so it holds ALL scBTC.

Now user-B with address B wants scBTC to use SC service.  

Using atomic swap:
1. user-a split A into B1(user-b owns private key) and the rest he will send into new A1(user-a owns pKey) and will do same in SC => user-a now own A1=A-B1 BTC  and same amount A1'=A'-B1' in SC. So user-a  created B1' shares in SC for user-b.

A(peg) -> B1(peg) + A1(peg)
A' -> B1' + A1'

2. at the same time user-b split B into A2(user-a owns pKey) and the rest into B2  => he still own B1,B1' and B2 private keys. Until user-b spend B1 he own B1' shares in SC

B -> A2 + B2 ... this BTCs are not used as 2wp (and never were)

result:
1. user-a control same amount of BTC A1(peg)+A2 and less amount of scBTC A'-B1' in A1'
2. user-b control same amount of BTC B1(peg)+B2 and he has shares in SC b/c he owns B1' pKeys
3. there is new transaction in SC =>  A' was split into A1' + B1'

It can be repeated as many times as required.
result:
we created decentralized 2wp -> everyone hold some BTC in Bitcoin and same amount of scBTC in SC

Step 2
Let's wait 1 days and we will be able to make transactions in SC

We all knows, no one withdrawn during 144 block
 - if somebody withdrawn NP b/c we only have smaller market cap.
 - if somebody split his shares NP b/c we will activate his scBTC again after 144 blocks are mined in MC and he can use our service.

What SC is offering you ?
 - really zero risk b/c you own your private keys (in MC and in SC) => the only risk is if Bitcoin main-chain will reorg 144 block
 - you can hold longer before you will create/accept first SC transaction (you own both MC and SC pKyes) => you can wait 10 days  1440 blocks
 - you can forget/lose your SC private keys b/c you own MC keys (u can spend your BTC in MC .. you will only not be able to make more transaction in SC)
 - ... to be continue :-)

[Adrian-x]

Lol'ed at your tl;dr

Let's assume the 20 page maths proof proves it can be done. Now is it a good idea to change the Bitcoin protocol to make this happen, what are the risks if any.

I see a few long-term outcomes:
First is Bitcoin is largely safe so long as there is a high block reward.
Competition for transaction fees on other chains  will come at the cost of security leaving the higher cost networks vulnerable to attack.
Unless we see growth outside the Bitcoin network, this would be like monetary inflation, as high value SC networks grow sucking up Bitcoin. (Also environmental impact of mining could be an issue if a dogecoin type scenario attracts BTC.)

The above assumes that SC don't have a corruption failure where BTC becomes "decapitated", or or malfeasance where Bitcoin takes the blame for a protocol error instead of say an entity like MtGox.

Other than the above SC all good.

[Erdogan]

Lol'ed at your tl;dr

Let's assume the 20 page maths proof proves it can be done. Now is it a good idea to change the Bitcoin protocol to make this happen, what are the risks if any.

I see a few long-term outcomes:
First is Bitcoin is largely safe so long as there is a high block reward.
Competition for transaction fees on other chains  will come at the cost of security leaving the higher cost networks vulnerable to attack.
Unless we see growth outside the Bitcoin network, this would be like monetary inflation, as high value SC networks grow sucking up Bitcoin. (Also environmental impact of mining could be an issue if a dogecoin type scenario attracts BTC.)

The above assumes that SC don't have a corruption failure where BTC becomes "decapitated", or or malfeasance where Bitcoin takes the blame for a protocol error instead of say an entity like MtGox.

Other than the above SC all good.

I had to go back to the paper to assess the volume of math, and I find far less than 20 pages of math. To be honest, I find the paper to describe history, some vision, using bad terms, bad economics. Basically, it could be written by the tailors in the story about the low confidence emperor and his new habit. What I found somewhat useful, is the idea of the atomic swap. You might think I am arrogant by saying this, but according to my mom I am quite bright, and I could easily understand the brilliance of the bitcoin whitepaper, but not this.

[Adrian-x]

Lol'ed at your tl;dr

Let's assume the 20 page maths proof proves it can be done. Now is it a good idea to change the Bitcoin protocol to make this happen, what are the risks if any.

I see a few long-term outcomes:
First is Bitcoin is largely safe so long as there is a high block reward.
Competition for transaction fees on other chains  will come at the cost of security leaving the higher cost networks vulnerable to attack.
Unless we see growth outside the Bitcoin network, this would be like monetary inflation, as high value SC networks grow sucking up Bitcoin. (Also environmental impact of mining could be an issue if a dogecoin type scenario attracts BTC.)

The above assumes that SC don't have a corruption failure where BTC becomes "decapitated", or or malfeasance where Bitcoin takes the blame for a protocol error instead of say an entity like MtGox.

Other than the above SC all good.

I had to go back to the paper to assess the volume offline math, and I find far less than 20 pages of math. To be honest, I find the paper to describe history, some vision, using bad terms, bad economics. Basically, it could be written by the tailors in the story about the low confidence emperor and his new habit. What I found somewhat useful, is the idea of the atomic swap. You might think I am arrogant by saying this, but according to my mom I am quite bright, and I could easily understand the brilliance of the bitcoin whitepaper, but not this.

FWIW my Mom also thought I was quite bright. Looking at Odalv post I assume it's possible, I was just reviewing some of the macro economic risks, and trying to understand if SC are a good idea or not, on a technical level it's a notable achievement. In reality I'd rather see some other trust free multisig solutions to the problems SC solve.

[Odalv]

We can add a little more complexity.  Maybe this will help...

 MC
 |   \
SC₁ SC₃
 |   /
SC₂

There is not force that can take SC1 pKey and SC3 pKey and move scBTC into SC2.
Only owners of SC1+SC3 pKeys can transfer into SC2.

[Adrian-x]

We can add a little more complexity.  Maybe this will help...

 MC
 |   \
SC₁ SC₃
 |   /
SC₂

There is not force that can take SC1 pKey and SC3 pKey and move scBTC into SC2.
Only owners of SC1+SC3 pKeys can transfer into SC2.

I'm a little unclear as to what happens if 60% of SC1+ 60%SC3 pKeys transfer into SC2. Then SC1 has a catastrophic failure.
Can SC3 be used to recover SC1 (pegged BTC)?

[Odalv]

We can add a little more complexity.  Maybe this will help...

 MC
 |   \
SC₁ SC₃
 |   /
SC₂

There is not force that can take SC1 pKey and SC3 pKey and move scBTC into SC2.
Only owners of SC1+SC3 pKeys can transfer into SC2.

I'm a little unclear as to what happens if 60% of SC1+ 60%SC3 pKeys transfer into SC2. Then SC1 has a catastrophic failure.
Can SC3 be used to recover SC1 (pegged BTC)?

- all keys form SC1 are lost
- new owners of SC2 pkeys (60 % of SC3 volume) can return into SC3 -> it depends on SC2 rules -> whitepaper describes all possibilities.