Pegged Sidechains [PDF Whitepaper]

[Boussac]

Obviously you can redeem any "sidecoin" of the same asset type using any of the locked coins, since as soon as you do a transaction on the sidechain the original transferred-in coin is consumed.

Thanks for the clarification that is worth adding at least a footnote in the white paper.
Also a sample transfer script sequence would help.

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[Come-from-Beyond]

Sorry for off-topic, but could anyone point me to a practical implementation (even if it's still in development)?

[DumbFruit]

The small space available for configuring the SPV proofs, the ease of 51% attacks, the high resource costs, fairly high complexity, and few use cases ends up making me very skeptical that the thing should be in Bitcoin, but I think it's a neat protocol.

Uh, what "ease" of 51% attacks? Or high resource costs?
And only few use cases? O.o

Maybe I misunderstood, but I thought that this thing needed to have it's own hash-power in order to avoid attacks from the main blockchain. Therefore, unless the sidechain has enormous hashpower it would be trivial for a party to break away from the primary chain to do a 51% attack.

I say it's few use cases because I'm not convinced that there are alot of uses that would be preferred to be in a sidechain, rather than a totally separate solution. Though I'm not financier or whatever, so I'm probably just ignorant of all the potential.

[Luke-Jr]

The small space available for configuring the SPV proofs, the ease of 51% attacks, the high resource costs, fairly high complexity, and few use cases ends up making me very skeptical that the thing should be in Bitcoin, but I think it's a neat protocol.

Uh, what "ease" of 51% attacks? Or high resource costs?
And only few use cases? O.o

Maybe I misunderstood, but I thought that this thing needed to have it's own hash-power in order to avoid attacks from the main blockchain. Therefore, unless the sidechain has enormous hashpower it would be trivial for a party to break away from the primary chain to do a 51% attack.

Merged mining solved this a long time ago.

I say it's few use cases because I'm not convinced that there are alot of uses that would be preferred to be in a sidechain, rather than a totally separate solution. Though I'm not financier or whatever, so I'm probably just ignorant of all the potential.

I can't think of any uses that would prefer a totally separate solution (other than scams).

[DumbFruit]

"First, the miner must assemble a transaction set for both block chains."
http://bitcoin.stackexchange.com/questions/273/how-does-merged-mining-work

So if I'm reading that right, merge mining would mean that miners would need to assemble a different transaction set for every sidechain and then mine them? Then for every successful block for any sidechain the miner would send that work to the sidechain.

I'm very confused about how the hashing calculation can be independent of both Bitcoin and the sidechain, I thought PoW built on top of a hash of the latest block, in which case the hashes from one blockchain can't be used to secure another blockchain (Except by total coincidence).

Yes, this is where I saw that;
"For a block to be valid it must hash to a value less than the current target; this means that each block indicates that work has been done generating it. Each block contains the hash of the preceding block, thus each block has a chain of blocks that together contain a large amount of work."
https://en.bitcoin.it/wiki/Proof_of_work

[Luke-Jr]

"First, the miner must assemble a transaction set for both block chains."
http://bitcoin.stackexchange.com/questions/273/how-does-merged-mining-work

So if I'm reading that right, merge mining would mean that miners would need to assemble a different transaction set for every sidechain and then mine them? Then for every successful block for any sidechain the miner would send that work to the sidechain.

I'm very confused about how the hashing calculation can be independent of both Bitcoin and the sidechain, I thought PoW built on top of a hash of the latest block, in which case the hashes from one blockchain can't be used to secure another blockchain.

The PoW algorithm for <sidechain> would include a Bitcoin block header in it.
But we're now somewhat off-topic for this thread, which is about sidechains, not merged mining...

[DumbFruit]

But we're now somewhat off-topic for this thread, which is about sidechains, not merged mining...

Fair enough, I still have some questions, but I'll find some other place for them.

I can't think of any uses that would prefer a totally separate solution (other than scams).

That highly depends on what the cost is going to be for moving stuff around on the Bitcoin blockchain, which in turn depends on how many sidechains, how decentralized the system is, how large the block size limit is, what the legal status is, and how much demand otherwise there is for bitcoin transactions.


Speaking of which, how would fees work here? The paper talks about how it's most beneficial to the miners to mine on every sidechain they can, but how do sidechains provide a reward? When users are using a sidechain do they need to provide fees to the network with their own bitcoins?

[Luke-Jr]

Speaking of which, how would fees work here? The paper talks about how it's most beneficial to the miners to mine on every sidechain they can, but how do sidechains provide a reward? When users are using a sidechain do they need to provide fees to the network with their own bitcoins?

Yes, just like any bitcoin transaction...
Sidechains might also use things like demurrage to give miners a subsidy.

[securedolphin]

I'm sorry if this is off-topic (I hope it is not)... but I still can't get a clear understanding of what makes pegged side chains fundamentally better than merged mining? I see some benefits but not a single one that won't be attainable within merged mining concept:

a. Ease of implementation and spawning a new chain? Can be done with merged mining with some alterations to bitcoin scripting language (pegged chains require that also)

b. Robustness? Looks to be the same, more or less, between pegged and merge mined chains

c. Blockchain pollution? Merged mining takes just 40 bytes (slightly less) per block for arbitrary, unlimited number of merged chains.

d. Atomic conversion and swap? I'm not sure if the side chain needs to be pegged for that. Again, peg or not can be done with merge mined chains. No?

What's left then?

[onemorebtc]

I'm sorry if this is off-topic (I hope it is not)... but I still can't get a clear understanding of what makes pegged side chains fundamentally better than merged mining? I see some benefits but not a single one that won't be attainable within merged mining concept:

a. Ease of implementation and spawning a new chain? Can be done with merged mining with some alterations to bitcoin scripting language (pegged chains require that also)

b. Robustness? Looks to be the same, more or less, between pegged and merge mined chains

c. Blockchain pollution? Merged mining takes just 40 bytes (slightly less) per block for arbitrary, unlimited number of merged chains.

d. Atomic conversion and swap? I'm not sure if the side chain needs to be pegged for that. Again, peg or not can be done with merge mined chains. No?

What's left then?

Pegged Sidechains and Merged Mining are to different concepts which can work together - but they dont need to.

Pegged Sidechain:
You can transfer a bitcoin to the sidechain and back to the btc blockchain.
-> not in the sense of trading but in the sense of moving: the moved btc is only available in the sidechain OR in the bitcoin blockchain

Merged Mining:
Just mine to chains at once. if they have a reward for finding a block you get both rewards (see namecoin for example: you can mine btc and nmc simultanously)

sidechains CAN be merged mined: this would make them more secure (if pools would support it though - otherwise its the opposit). but you can also make a sidechain which uses POS.

[securedolphin]

I'm sorry if this is off-topic (I hope it is not)... but I still can't get a clear understanding of what makes pegged side chains fundamentally better than merged mining? I see some benefits but not a single one that won't be attainable within merged mining concept:

a. Ease of implementation and spawning a new chain? Can be done with merged mining with some alterations to bitcoin scripting language (pegged chains require that also)

b. Robustness? Looks to be the same, more or less, between pegged and merge mined chains

c. Blockchain pollution? Merged mining takes just 40 bytes (slightly less) per block for arbitrary, unlimited number of merged chains.

d. Atomic conversion and swap? I'm not sure if the side chain needs to be pegged for that. Again, peg or not can be done with merge mined chains. No?

What's left then?

Pegged Sidechains and Merged Mining are to different concepts which can work together - but they dont need to.

Pegged Sidechain:
You can transfer a bitcoin to the sidechain and back to the btc blockchain.
-> not in the sense of trading but in the sense of moving: the moved btc is only available in the sidechain OR in the bitcoin blockchain

Merged Mining:
Just mine to chains at once. if they have a reward for finding a block you get both rewards (see namecoin for example: you can mine btc and nmc simultanously)

sidechains CAN be merged mined: this would make them more secure (if pools would support it though - otherwise its the opposit). but you can also make a sidechain which uses POS.

Thanks for the comment! It makes sense, but also makes me wonder about the value of "transfer a bitcoin to the sidechain and back to the btc blockchain" - what would be the real world example when moving is superior to cross-coin trading? Not to be critical, just a genuine attempt to understand. In other words, what can't be done in a world where there are only merge mined coins (chains)  and no pegged coins? I couldn't think of anything...

[cypherdoc]

Boussac and I are trying to better figure out the details of the peg mechanism and their consequences at a higher level (economic).
Basically, the question is the one asked by Boussac:

Let's say I have locked one bitcoin to release one sidecoin. To release the locked bitcoin, does my sidechain-enabled wallet simply collect one sidecoin (plus tx fee) worth of sidechain unspent outputs or  are there other constraints on my sidechain transaction transferring the coin back to the bitcoin blockchain ?

Once a bitcoin is locked to a sidechain, it is entirely up to the sidechain rules what the terms are for the release.
The obvious case is 1:1 equivalence, but there's nothing saying a sidechain must do it that way.

Thanks but my (very basic) question is about the fungibility of the sidecoins.
I rephrase the question.
Is the release of a locked bitcoin (or any fraction thereof)  tied to a specific sidechain transaction OR is there flexibility in the choice of the unspent outputs on the sidechain to release the locked bitcoin?

Pratical use case: suppose I have locked one bitcoin in tx A to release one sidecoin in tx A' on the sidechain.
Later, I lock another bitcoin in tx B to release another sidecoin in tx B'.
Can I redeem the second sidecoin to release the first bitcoin ?

If tx A and tx B are transferring from the same parent blockchain, they should be the same asset on the sidechain.
Obviously you can redeem any "sidecoin" of the same asset type using any of the locked coins, since as soon as you do a transaction on the sidechain the original transferred-in coin is consumed.

but aren't private keys created on the SC that are specific to a certain scBTC?  and when redeeming back to BTC, wouldn't the owner of those same scBTC have to come back thru the same SPV proof where they originated from?

[onemorebtc]

Thanks for the comment! It makes sense, but also makes me wonder about the value of "transfer a bitcoin to the sidechain and back to the btc blockchain" - what would be the real world example when moving is superior to cross-coin trading? Not to be critical, just a genuine attempt to understand. In other words, what can't be done in a world where there are only merge mined coins (chains)  and no pegged coins? I couldn't think of anything...

atomic transfer?
afaik this is not possibly with other chains. it could be very useful for many things.. first thing which pops in my mind is a chain for micropayments which has a different security model than bitcoin and maybe less blockchain space requirements.

[Adrian-x]

Speaking of which, how would fees work here? The paper talks about how it's most beneficial to the miners to mine on every sidechain they can, but how do sidechains provide a reward? When users are using a sidechain do they need to provide fees to the network with their own bitcoins?

Yes, just like any bitcoin transaction...
Sidechains might also use things like demurrage to give miners a subsidy.

the most most exciting use SC-crypto's I can imagine:
free transaction fees with almost instant confirmation, demurrage fees 5% per year for saving in your own private keys, and interest for saving on a Centralized server 2% (determined by money in circulation ie block processing demurrage); instant access to funds with centralized server; and 2% inflation (server revenue = 0% cost for saving); a 1:1 peg with Bitcoin, miners receive 1% of all transactions that incur demurrage for MM. The intervals and percentages are not set but are amortized over the year and just represent an incentive split for the - per block demurrage. throw in a 3 days of clearing to exchange out BTC to encourage users to take advantage of the almost instant network with no risk of loosing Bitcoin as its secured with a 2wp.     

[balu2]

i am a nobody (laimen/enduser/speculator what ever you want to call it) around here. Just reading up on this.

This doesn't look ready at all. This is not coming soon, is it?
I have to ask myself: why implement that in bitcoin without testing? Is an altcoin-experiment planned to simulate for some time before moving to bitcoin itself?

Would be interesting to see what alts join that. Shitcoins for sure. So Bitcoin opens itself up to accomodate shitcoins that can't live on their own? Will enable people with no coding skills to pull scams. Watching, ordered the big bag of popcorn already. Can't wait for you to screw this up royally. Introduce more complexity, go ahead  
Provide fertile ground for every possible crap on earth to be secured with bitcoin hashpower that couldn't survive on its own, good idea. Your blockchain will be full of utter shit in no time and then you cry about the bloat.  
To prevent it you have to introduce central control very likely in the end.


you big boys are probably better off to play around with new tech in altcoins before moving to bitcoin but very likely everyone is on their high horse and doesn't want to listen. Not that i would care too much.  

I have been personally reading around for hours about this, yet i don't see what sidechains should be able to do what an altcoin isn't able to do or what real benefits they provide. I think right now of it as an elegant way to calm down the bitcoin hardcore-hoarders/believers/cultists from the potential threat that an altcoin could be for their investement. If i am right on that one this whole idea is likely a fascist one. I'll continue to read. I just hope i can find the huge benefits that couldn't be achieved by any other means in this whole idea.

Sidechain-coins don't have an independant value from what i read here because of the arb and because they are basically bitcoin. So what's the point? Experimenting? lol. Why do that on the bitcoin-chain? If you got experiments to do, why not do it with a bitcoin-clone that doesn't carry that marketcap?

what most people are missing: 'features are not money' and bitcoin is mainly money. The more you ad unnecessary stuff the more problems you will create. I'd recommend to keep it basic to money and play around with features and other possibilities of the blockchain-tech on other platfoms to not put the main purpose of bitcoin in joepardy (to be currency that is). But as i already stated: i am relatively uneducated

Quote from a wise man:
"Perfection is achieved not when nothing can be added, but when nothing can be left out"

[Adrian-x]

. But as i already stated: i am relatively uneducated

That's the only irrelevant part of your post.
As for the idea that this benefits existing Bitcoin whales. It doesn't. It's a proposal that benefits those who have spent a large part their Bitcoin and those who have yet to invest.

[cypherdoc]

Sidechains are a bad idea. 

[PirateHatForTea]

Why, because of your imaginary 'put'?

If it is algorithmically guaranteed that you can convert 1:1 from a parent chain to a sidechain, then the fiat exchange rates for each can not diverge, aside from a small spread reflecting time preference (because it may take days to transfer between chains unless you use atomic swaps. But then market makers will happily offer atomic swaps for a spread).

I don't understand why you find this concept difficult. I think you are getting confused by Altcoins.

[sickpig]

Sidechains are a bad idea.  

wow you're profound today :-)

at least you should have added a link to your own thread where sidechain's economic is debated at length

don't worry I'll do it for you:

https://bitcointalk.org/index.php?topic=68655.msg9292756#msg9292756

starting from the above, the thread turns its focus mainly on sidechains with a lot a valuable
inputs from a lot of people, of course there's also a lot of noise along the way.

edit: fix grammar

[BlindMayorBitcorn]

So what's the point? Experimenting? lol. Why do that on the bitcoin-chain? If you got experiments to do, why not do it with a bitcoin-clone that doesn't carry that marketcap?

I'm still searching for a good justification for this myself