Gold collapsing. Bitcoin UP.

[brg444]

Are you insinuating that this mechanism leads to more centralization and therefore more counterparty risk?

Stop playing around and just say what's on your mind, you don't appear to me to be someone who usually play the cat and mouse game.

I'm insinuating that you have no idea what you're talking about with regards to counterparty risk, centralization, or distributed consensus.

The reason I know this is because of how you worded your previous comment - your scenario was a "100% merge mined" sidechain.

Of course that makes sense, right?

1. Hashing is what makes Bitcoin secure
2. More hashing equals more security
3. Therefore any chain that has an equal amount of hashing power as Bitcoin will be equally secure.

Sounds great, except the first premise is false, therefore so is the conclusion.

Hashing isn't what secures Bitcoin - opportunity cost is what secures Bitcoin.

Anybody who doesn't understand that is not qualified to evaluate the security properties of sidechains.

It seems to me attacking any sidechain that is mined by all miners offers no less opportunity cost than attacking BTC.

I don't claim to understand everything. I do know that comparing sidechains to mere promissory notes is disingenuous in itself.

Bottom line is it appears to me sidechains are our best attempt so far at reducing the counterparty risk implied by off-chain/sidechain schemes.

This blog post is a very interesting practical demonstration of the way I'm seeing it.
http://gendal.wordpress.com/2014/11/14/the-unbundling-of-trust-how-to-identify-good-cryptocurrency-opportunities/

Using his centralization continuum here is my view on the debate

[justusranvier]

It seems to me attacking any sidechain that is mined by all miners offers no less opportunity cost than attacking BTC.

Read these:

https://gist.github.com/oleganza/8cc921e48f396515c6d6

https://download.wpsoftware.net/bitcoin/pos.pdf

[brg444]

It seems to me attacking any sidechain that is mined by all miners offers no less opportunity cost than attacking BTC.

Read these:

https://gist.github.com/oleganza/8cc921e48f396515c6d6

https://download.wpsoftware.net/bitcoin/pos.pdf

I have read those a while ago and I appreciate you sharing them again but could you explain how MM creates a different opportunity cost  and maybe provide an example?

[thezerg]

I am only able to sample this thread lately due to time constraints so I apologize if my responses have already been covered.

the basis of my argument is that the BTC unit cannot be separated from its blockchain (mainchain) w/o breaking Bitcoin as Money. imo, sidechains allow this and if you read their whitepaper, their core assumption is that they they can be separated.

But its not really separated is it?  The BTC unit remains on the mainchain, "locked", essentially backing the sidechain.  Its like paper gold being backed by phys, except that it impossible to hide naked paper.  As a one-time holder of phyz gold and silver, I imagine that you'd agree that problems with the paper are unlikely to significantly affect the actual gold in your vault, except perhaps by removing value that the paper conferred (that is, many people think that gold ETFs drove the rise due by opening a larger market, and of course that additional value also floated phys).

yes, we have been through this, that's how thoroughly we've all picked this apart.  i think it's conceptually constipating to stop your view of what's happening at the SPVproof (spvp) border, as if those BTC's always remain on the MC.  no, it's much more illuminating and as a laxative to view the spvp as an offramp into another speculative asset (defined as anything other than BTC which is the only sound hard money) such as Cashcoin, Truthcoin, votecoin, stocks, bonds, prediction markets, anything else.  as well, your model implies that someday these have to just be unlocked on a journey back to mobile BTC.  not true, whatever emerges on the other side of the spvp may never come back as Bitcoin has been forever changed by the mere insertion of the spvp.  i think that mere insertion forever breaks the Bitcoin concept as Sound Money.  it's like throwing the front door of your cattle barn wide open.  at first, nothing happens.  but once the cattle realize they are no longer safe from wolves entering, they start wandering out until you eventually get a stampede.

Blockstream registered as a for-profit entity earlier this year and they have $15M investment. their biz model is constructing SC's for other entities, namely corporations, banks, gvts, anyone willing to pay for the tech. in essence, they are now in the exact same position as Mastercoin, Bitshares, CP in terms of competing to mold Bitcoin into profitability for themselves.

their business model is dependent on inserting a change into the source code called a SPV proof. this would allow BTC to flow off the highly secure Bitcoin blockchain ledger into these SC businesses where sidechain ledgers rules will be determined however the business wants and will be inherently less secure as they will not be merge mined or even directly mined. they will require trust and will ensure security most likely by signing off on blocks as they are constructed with their own signing keys.

I would prefer the devs work independently too, but reality isn't perfect.  But again, the BTC are not "flowing off" the Bitcoin ledger... BTC is simply being used to transparently back another chain.

see above.

there will be thousand of entities who will bolt themselves onto Bitcoin via these SPV proofs. this will in effect allow a siphoning of value, BTC units, out of Bitcoin itself. how will Bitcoin miners make their required income from tx fees if all these BTC have moved offchain to sidechains? how will Bitcoin maintain its monetary function if all these BTC have moved to sidechains and have been converted to all manner of speculative assets?

If there really will be 1000 entities who need sidechains, we now have 1000 additional uses for Bitcoin which will massively increase demand for coins and resulting in a huge price increase.  This is a great problem to have.

We already imagine that if Bitcoin gains a large pct of the world's txns, it may not scale, resulting in high txn fees, and therefore may end up being used mostly for large transfers.  In your 1000 entities scenario, the only difference is that instead of large opaque transfers (we don't know anything about the BTC transfer just that it happened), we can see that X coins moved from SC A to SC B.

But running a SC does have overhead and risk.  It seems obvious to me that companies will use the mainchain if possible (that is, it scales and can capture the transaction).

You can't stop innovation.  If in the SC future there will be 1000 sidechains backed with Bitcoin, in the non-SC future there will be 1000 altcoins, and Bitcoin's market cap will be 1000 times lower then it could have been.

brg444 has also changed his argument to "there will only be Blockstream creating 2 utility SC's to now there will be a bunch of Blockstream-like companies like Google, IBM producing SC's in droves".  i believe this new backpedaled theory is what will happen.  that's b/c the spvp has inserted a costless, riskless, backdoor offramp which breaks Bitcoin's hard money security and allows a siphoning of value to these 1000's of SC's as new speculative assets.

once we allow that offramp to be inserted into the source code, it's game over.

Thanks for catching me back up!!!  I have to say that I don't agree with you though.  Although I think your mind is set, I will just lay out my position here and then leave it:  

If anything there will be a mass stampede back INTO the barn (the bitcoin masterchain) if the danger of SPV-coin-stealing materializes or like with altcoins people realize that a particular sidechain is not valuable.  When compared to altcoins, all sidechains let you do is transfer between the Bitcoin chain in a decentralized fashion and keep the value concentrated into the originally formulated 21 million units.  

Off ramps already exist, centralized exchanges let you convert between btc and other altcoins.  But has everyone left bitcoin?  There are compelling reasons to keep bitcoin. They won't leave with sidechains either.  And altcoins are true offramps -- the value leaves the bitcoin ecosystem.  Sidechains keep the value within the bitcoin 21 million limit, enhancing the aggregate ecosystem... as a bitcoin holder, I would much prefer this when (if) someone comes up with a functionally compelling sidechain.

[justusranvier]

When a Bitcoin miner starts merge mining Namecoin, how much more opportunity cost do they forfeit compared to the case where they only mine Bitcoin?

The time, electricity, and capex needed for mining Bitcoin doesn't count because that cost is paid for with Bitcoin. From the perspective of Namecoin's security model, it's not an opportunity cost.

If a Bitcoin miner wants to attack Bitcoin's ledger, they have to pay a real cost for it. If a Bitcoin miner wants to attack Namecoin, the cost of the attack is effectively free.

We know how easy it is for Bitcoin miners to attack other double SHA256 ledgers, because they've done it before.

At best, merge mining creates security equivalent to proof of stake.

[notme]

When a Bitcoin miner starts merge mining Namecoin, how much more opportunity cost do they forfeit compared to the case where they only mine Bitcoin?

The time, electricity, and capex needed for mining Bitcoin doesn't count because that cost is paid for with Bitcoin. From the perspective of Namecoin's security model, it's not an opportunity cost.

If a Bitcoin miner wants to attack Bitcoin's ledger, they have to pay a real cost for it. If a Bitcoin miner wants to attack Namecoin, the cost of the attack is effectively free.

We know how easy it is for Bitcoin miners to attack other double SHA256 ledgers, because they've done it before.

At best, merge mining creates security equivalent to proof of stake.

Merge mining may not require more hashes, but it does require CPU, ram, and network resources.

[brg444]

When a Bitcoin miner starts merge mining Namecoin, how much more opportunity cost do they forfeit compared to the case where they only mine Bitcoin?

The time, electricity, and capex needed for mining Bitcoin doesn't count because that cost is paid for with Bitcoin. From the perspective of Namecoin's security model, it's not an opportunity cost.

If a Bitcoin miner wants to attack Bitcoin's ledger, they have to pay a real cost for it. If a Bitcoin miner wants to attack Namecoin, the cost of the attack is effectively free.

We know how easy it is for Bitcoin miners to attack other double SHA256 ledgers, because they've done it before.

At best, merge mining creates security equivalent to proof of stake.

How is it free if the chain is secured by the same work as BTC !?

If the work produced to secure Namecoin runs parallel to Bitcoins' and is equivalent then the opportunity cost to attack is the same. No?

I understand that there is no more additional work required from the miner but the work produced is enough to simultaneously secure both chains is it not?

[justusranvier]

Generally speaking, there are two different ways in which a miner can behave: they can operate in good faith or they can grief.

Griefer miners have to pay a real cost for their bad behaviour - they expend significant quantities of electricity and capex depreciation which they will never recover.

What if a Bitcoin miner decides to grief the Namecoin blockchain? Mine empty blocks, intentionally orphan valid parts of the chain, run difficulty up and then pull out, attempt double spends of Namecoins, etc.

Their electricity and capex is paid for by the Bitcoins they mine. Sure, they have to spend a little bit in bandwidth to run a Namecoin node, but that cost is insignificant compared to the cost of mining Bitcoin.

This is why merged mining doesn't provide the kind of security that people think it provides. The only security comes from the goodwill of the mining pool operators, without strong economic incentives that make good behaviour much more profitable than bad behaviour.

Just like proof of stake, and also just like central banks.

[brg444]

Generally speaking, there are two different ways in which a miner can behave: they can operate in good faith or they can grief.

Griefer miners have to pay a real cost for their bad behaviour - they expend significant quantities of electricity and capex depreciation which they will never recover.

What if a Bitcoin miner decides to grief the Namecoin blockchain? Mine empty blocks, intentionally orphan valid parts of the chain, run difficulty up and then pull out, attempt double spends of Namecoins, etc.

Their electricity and capex is paid for by the Bitcoins they mine. Sure, they have to spend a little bit in bandwidth to run a Namecoin node, but that cost is insignificant compared to the cost of mining Bitcoin.

This is why merged mining doesn't provide the kind of security that people think it provides. The only security comes from the goodwill of the mining pool operators, without strong economic incentives that make good behaviour much more profitable than bad behaviour.

Just like proof of stake, and also just like central banks.

I understand.

But this changes in respect to the economic incentive of the chain, correct? If miners profit from the considerable value transfer (transactions fees) on a sidechain then there is more incentive for miners to operate in good faith, right?

If we consider an ideal situation where there is economic incentive for miners to act with good faith do you agree with this model?

[sidhujag]

When a Bitcoin miner starts merge mining Namecoin, how much more opportunity cost do they forfeit compared to the case where they only mine Bitcoin?

The time, electricity, and capex needed for mining Bitcoin doesn't count because that cost is paid for with Bitcoin. From the perspective of Namecoin's security model, it's not an opportunity cost.

If a Bitcoin miner wants to attack Bitcoin's ledger, they have to pay a real cost for it. If a Bitcoin miner wants to attack Namecoin, the cost of the attack is effectively free.

We know how easy it is for Bitcoin miners to attack other double SHA256 ledgers, because they've done it before.

At best, merge mining creates security equivalent to proof of stake.

Merge mining may not require more hashes, but it does require CPU, ram, and network resources.

Resources are negligible after the bloat issue was fixed and headers were stored to disk by seperating mutable vs immutable data in block index classes.. Check out my devcoin merged mining patch

[cypherdoc]

Bugs can't take entymologists to breakfast-Zingales

Economists are just as captured as regulators

http://www.econtalk.org/archives/2014/10/continuing_conv_23.html

[Adrian-x]

TC is a pathetic example and an obvious scam that will attract so much suckers before it gets exposed.

TC in this statement is TruthCoin.

brg444 This guy has a much better take on what SC are than you.
He understand the mining incentives that make Bitcoin, the only scam he's pulling is capitalizing on the inflation effect offered by the idea of SC's, someone who gets mining like this and looks for a win win without addressing the effect the proposed protocol change will have on mining incentives is a businessman, he isn't the scanner you think he is. We'll see thousand of these  

brg444 read the article you may learn something please address all criticism on the appropriate blog, feel free to invite my input over there if you like.

http://www.truthcoin.info/blog/pow-and-mining/

[brg444]

TC is a pathetic example and an obvious scam that will attract so much suckers before it gets exposed.

TC in this statement is TruthCoin.

brg444 This guy has a much better take on what SC are than you.
He understand the mining incentives that make Bitcoin, the only scam he's pulling is capitalizing on the inflation effect offered by the idea of SC's, someone who gets mining like this and looks for a win win without addressing the effect the proposed protocol change will have on mining incentives is a businessman, he isn't the scanner you think he is. We'll see thousand of these  

brg444 read the article you may learn something please address all criticism on the appropriate blog, feel free to invite my input over there if you like.

http://www.truthcoin.info/blog/pow-and-mining/

I have been waiting for your input on our discussion over here for awhile. Hopefully you will deliver, I'll be patient.

Thanks for the heads up though, looks interesting. I will frankly say I did not even bother looking into him or his website after having a glance at his "sales pitch"

[lebing]

[hdbuck]

Bitcoin collapsing, SC up.

[Odalv]

Generally speaking, there are two different ways in which a miner can behave: they can operate in good faith or they can grief.

Griefer miners have to pay a real cost for their bad behaviour - they expend significant quantities of electricity and capex depreciation which they will never recover.

What if a Bitcoin miner decides to grief the Namecoin blockchain? Mine empty blocks, intentionally orphan valid parts of the chain, run difficulty up and then pull out, attempt double spends of Namecoins, etc.

Their electricity and capex is paid for by the Bitcoins they mine. Sure, they have to spend a little bit in bandwidth to run a Namecoin node, but that cost is insignificant compared to the cost of mining Bitcoin.

This is why merged mining doesn't provide the kind of security that people think it provides. The only security comes from the goodwill of the mining pool operators, without strong economic incentives that make good behaviour much more profitable than bad behaviour.

Just like proof of stake, and also just like central banks.

What about converting Namecoin to NameSC ? Same functionality as now -> you will only pay for service with BTC. Do you need NMC ?

[brg444]

TC is a pathetic example and an obvious scam that will attract so much suckers before it gets exposed.

TC in this statement is TruthCoin.

brg444 This guy has a much better take on what SC are than you.
He understand the mining incentives that make Bitcoin, the only scam he's pulling is capitalizing on the inflation effect offered by the idea of SC's, someone who gets mining like this and looks for a win win without addressing the effect the proposed protocol change will have on mining incentives is a businessman, he isn't the scanner you think he is. We'll see thousand of these  

brg444 read the article you may learn something please address all criticism on the appropriate blog, feel free to invite my input over there if you like.

http://www.truthcoin.info/blog/pow-and-mining/

Well, turns out this guy is a pretty smart fellow. It would be nice to have HIS input on sidechains. Every articles on his blog so far are very interesting and full of insights.

[tabnloz]

Jim Rickards in an interview re: China debt, global depression (lower % growth than could be achieved - the Keynesian def) and timing of the next crisis

Anyways, speaking about a system reset, the last question was:

Do you think such scenarios make people more optimistic about crypto currencies like Bitcoins?

I see the rise of crypto-currencies as a sign of waning confidence in traditional currencies, such as the dollar. I expect the trend towards alternative currencies, such as Bitcoin, to grow as central banks continue to fail in their efforts to manipulate asset values.

http://internationalfinancemagazine.com/article/The-debt-problem-in-China-is-not-hype.html#sthash.XPW1qNhD.dpuf

[cypherdoc]

Jim Rickards in an interview re: China debt, global depression (lower % growth than could be achieved - the Keynesian def) and timing of the next crisis

Anyways, speaking about a system reset, the last question was:

Do you think such scenarios make people more optimistic about crypto currencies like Bitcoins?

I see the rise of crypto-currencies as a sign of waning confidence in traditional currencies, such as the dollar. I expect the trend towards alternative currencies, such as Bitcoin, to grow as central banks continue to fail in their efforts to manipulate asset values.

http://internationalfinancemagazine.com/article/The-debt-problem-in-China-is-not-hype.html#sthash.XPW1qNhD.dpuf

Nice find.

The back pedaling is  almost complete.

[kodtycoon]

TC is a pathetic example and an obvious scam that will attract so much suckers before it gets exposed.

TC in this statement is TruthCoin.

brg444 This guy has a much better take on what SC are than you.
He understand the mining incentives that make Bitcoin, the only scam he's pulling is capitalizing on the inflation effect offered by the idea of SC's, someone who gets mining like this and looks for a win win without addressing the effect the proposed protocol change will have on mining incentives is a businessman, he isn't the scanner you think he is. We'll see thousand of these  

brg444 read the article you may learn something please address all criticism on the appropriate blog, feel free to invite my input over there if you like.

http://www.truthcoin.info/blog/pow-and-mining/

burterins arguments against the paper:

https://www.reddit.com/user/vbuterin