Gold collapsing. Bitcoin UP.

[Zangelbert Bingledack]

It seems that if an SC inflates beyond the number of pegged coins, there will necessarily be two classes of coins in that SC: those that are convertible back to BTC and those that are not.

My understanding is that the BTC is just locked when converted to the SC, so it can't just be lost. It's not a perfectly symmetrical situation: converting *to* the sidechain involves locking BTC and creating SC coins, whereas converting *from* the sidechain involves unlocking BTC and destroying SC coins. (Right?)

 

[albin]

I think the real underlying motivation for SC's is almost entirely political.

The impression that I get listening to interviews and reading is that Adam Back's "I just heard about Bitcoin and I'm here to fix it" (or maybe "I was the first person who heard about Bitcoin but I though Satoshi was a moron") moment in 2013 was being an ideas guy for homomorphic encryption in outputs. He rapidly discovers that ginormous hardforking changes like that can't just be suggested and immediately spearheaded by the project, so SC becomes a development paradigm for adding new features without going through the project.

Being that he eventually figured out how to de facto own the Core project through Blockstream, I think the political motivation for proper two-way peg SC's is almost entirely gone, even moreso if they achieve Script versioning softforkability through SFSW.

 

[Mengerian]

Just read through the latest Pantera Capital letter (ht @bitcartel). Overall fairly informative, however this passage jumped out at me:

In the case of one alternative scalability proposal, Bitcoin Classic: in theory, implementing an immediate 2MB change would immediately alleviate block congestion but would require a hard fork. Hard forking carries with it certain systemic risks:

• Bitcoins received from before the fork can be spent twice, once on both sides of the fork. This creates a high double-spend risk.
• Bitcoins received after the fork are only guaranteed to be spendable on the side of the fork they were received on. This means some users will have to lose money to restore Bitcoin to a single chain.

In essence, if a hard fork goes bad, it will likely cause large-scale confusion and make Bitcoin incredibly difficult to use until the situation is resolved. There’s also a very real chance of total system failure if a hard fork’s deployment is not well-coordinated across the entire network.

So it seems that investors, at least these ones, still think hard forks are bad for Bitcoin. But from our discussions, we see that hard forks are just an opportunity for market participants to better communicate their preferences. So hard forks should be good for Bitcoin.

This makes me think that if a hard fork seems imminent, it could be a very volatile time for the bitcoin price. There could be lots of panic and confusion. We should keep developing and trying to communicate our ideas, but it could also be a time to take advantage of our theories if we feel that others are missing key insights.

 

[molecular]

I've asked this many times and never got a good answer - why would a 2-way Peg hold if the 2 chains don't share same level of security, features, mining support etc. People supporting 2-way Pegs seem to think users would only ever do exchanges from Main chain(=Bitcoin) to Side Chain and back again, not the reverse.

They seem to think that using a formula to fix the value between two different moneys, magically will remove the economic laws. The value comes from the minds of individuals, acting in their self interest, choosing one thing over another, and a snip of code can do nothing about it.

Sounds like you understand "2-way peg" as what is being done in the fiat world. Such a peg is decreed by some authority (based on "formula") and then must be "enacted" by "market action".

A peg as proposed between a sidechain and its main chain is imo a bit of a misnomer. The coins on the main chain are being "locked" in place for as long as their sidechain pendants exist. It's more of a "transfer" type of thing. The MC coins are unusable as long as the SC coins exist. Or am I misunderstanding?
[doublepost=1454744505][/doublepost]

The hard money people will come over when they see, experience and feel the power of bitcoin.

I share this sentiment.

side-note: I've grown quite thankful to the banks and media for pulling the "blockchain tech" diversion. That way, at some point (when the media hype about blockchain tech has subsided a bit), people (and media) will have a clearer picture about the fact that bitcoin is many things (tech, money, payment sytem, movement, community,...) and then we can start a conversation about money (and Bitcoin) again. If this coincides with increased troubles in the financial system I can see a broad discussion and "education of the masses" about monetary issues. Much-needed, of course.

 

[tynwald]

The hard money people will come over when they see, experience and feel the power of bitcoin.

I believe this is behind the interest of many central banks in Bitcoin and Blockchain technology in general. Oh, and you can tax people at will and cancel their balance in real time.

 

[Erdogan]

Sounds like you understand "2-way peg" as what is being done in the fiat world. Such a peg is decreed by some authority (based on "formula") and then must be "enacted" by "market action".

The market action required is to always, without exception, offer bitcoins for sidecoins.

A peg as proposed between a sidechain and its main chain is imo a bit of a misnomer. The coins on the main chain are being "locked" in place for as long as their sidechain pendants exist. It's more of a "transfer" type of thing. The MC coins are unusable as long as the SC coins exist. Or am I misunderstanding?

The pegging in the fiat world is always with less than full reserve, else there would be no gain for the money manager and thus no point in doing it.

In the fiat world, deposit money is pegged to the actual fiat paper rectangles, but in this case, the deposit money have better qualities regarding transferability, and worse qualities since they depend on the bank. Maybe the sidechains people want to do something like it.

I think this can be done with a full reserve bitcoin bank, supplying guarantee of immediate finalization, higher capacity, simpler cards and readers, loyalty, cash-backs, customer and supplier ratings, and what else the current credit card companies now do. There is no reason to put the basic sound money function of bitcoin at risk. We already have a few services like it.

 

[cypherdoc]

I think the real underlying motivation for SC's is almost entirely political.

The impression that I get listening to interviews and reading is that Adam Back's "I just heard about Bitcoin and I'm here to fix it" (or maybe "I was the first person who heard about Bitcoin but I though Satoshi was a moron") moment in 2013 was being an ideas guy for homomorphic encryption in outputs. He rapidly discovers that ginormous hardforking changes like that can't just be suggested and immediately spearheaded by the project, so SC becomes a development paradigm for adding new features without going through the project.

Being that he eventually figured out how to de facto own the Core project through Blockstream, I think the political motivation for proper two-way peg SC's is almost entirely gone, even moreso if they achieve Script versioning softforkability through SFSW.

Yep, the current plan is to enable CT thru the SF script versioning system once SW is enabled.

 

[theZerg]

@molecular the btc is locked but the number of scBTC is not fixed so the peg has a human political component

 

[tynwald]

hence the greatest weakness of Side Chains is that any difference in security, network value fluctuations, protocol options will open up attack vectors against Bitcoin. It's like 2 countries both printing money and you're hoping that they both have secure facilities and no chance for the notes to be copied.

 

[cypherdoc]

@Mengerian

In SW, what's your understanding of how it encourages reduction of the UTXO set?

 

[cypherdoc]

don't forget this about SC's from maaku7:


it seems to me they are pivoting to get SWSF in place with script versioning which would then allow inserting CT directly into the protocol via this script mechanism thru yet another SF.

 

[molecular]

@molecular the btc is locked but the number of scBTC is not fixed so the peg has a human political component

ok, so scBTC can be inflated. But what if there is a run on the main chain tokens? I'm assuming the mcBTC could not be inflated and some of the scBTC would be "converted" sucessfully while the rest of the scBTC would be "inconvertible"? Is that an accurate depiction?

The "human political component" would lie in the fact that this is actually a kind of fractional reserve banking?

 

[cypherdoc]

@molecular

i think so. BS has admitted that a SC could fail outright taking all scBTC with it. also, getting back to the MC requires a miner to verify a "proof" provided by the scBTC holder that acts like an SPV look back.
[doublepost=1454776867][/doublepost]ok, so after thinking about SW for a few days and poking around a bit, i still think what i wrote in Wednesday's post is mostly accurate and i've removed my strikethroughs from the first post here:

https://bitco.in/forum/threads/gold-collapsing-bitcoin-up.16/page-308#post-11291

and rewrote a portion of the second post here:

https://bitco.in/forum/threads/gold-collapsing-bitcoin-up.16/page-308#post-11292

i'm going to leave these as is until/unless someone can come along and point out factual errors in my thinking. i'd welcome that as there are still some statements made about SWSF that puzzle me.

 

[AdrianX]

Just saw this an LOLed hard.

From https://news.bitcoin.com/bitcoin-classic-nodes-surge-following-beta-2-release/

This is like Coke launching a new brand Unlimited is actually more like the real thing though but I like this flavor too.

 

[Mengerian]

@Mengerian

In SW, what's your understanding of how it encourages reduction of the UTXO set?

Hi @cypherdoc!

It does it by trying to bias the market for transaction space in favor of signature data, rather than input and output data. This should favor transactions with many inputs, and few outputs, since inputs are the parts that need to be signed. Ouputs are what adds to UTXO, so favoring transactions with fewer ouputs should (in theory) lead to smaller UTXO over time.

This occurs because the "a" block is still restricted to 1MB or less, and all the inputs and outputs need to fit in this space. Inputs need to be signed, and for normal transactions this takes up lots of block space. For segwit transactions, however, the signatures are put in the "b" block, and their size is "discounted" by 1/4 under the new block-size consensus rule formula.

Let's consider an example. Say we are comparing two transactions that are both 1000 bytes. One transaction (TX1) has one input, and many outputs. The second transaction (TX2) has many inputs and one output. Currently we could fit 1000 of either transaction in a block. Under segwit, you could still only fit about 1000 TX1s into blocks, since there is very little input signature data, and all the outputs still need to be listed in the "a" block. But TX2 is mostly inputs, so a lot of its size is made up of signature data. If the signatures are, say, half of the data in TX2, then each transaction adds 500 bytes to the "a" block and 500 bytes to the "b" block. Solving for the new consensus rule a + b/4 <= 1MB, we find that you can fit 1600 TX2 transactions into blocks under the segwit rules.

So if TX1 and TX2 both have the same fee, under segwit miners should favor TX2 for inclusion in blocks.

 

[cypherdoc]

@Mengerian

so do multisig tx's tend to conform to the many input, and few output scenario?

 

[Mengerian]

@cypherdoc

Multisig is a property of each input and output. A transaction can be composed of any number of inputs and outputs, and each of those inputs and outputs can be "standard" or multisig.

Multisig inputs have larger signatures that "standard" signature inputs. So segwit will also tend to favor transactions with multisig inputs, following similar reasoning as above.

 

[JVWVU]

kinda disappointed. NewLiberty is a small blockist:

Damn my sexy ass wife picture made it here.

And NewLiberty imo is not a small blockist but a sensible blockist. He sees issues and until they are fixed then it's not time to scale.

Here is where I disagree with his this is political because the current Core imo is being cohersed by Blockstream, and in order to break that the status quo response has to be both political and code based. To push outside coders to implement changes so we can determine which code is better and thus Hard fork too.

I personally like the side chain concept but to force it as the be all end all is wrong. I like it more a a regional currency basis where different transactions fees can happen versus more expensive on the Bitcoin blockchain.

I would like to see a future of "Bitcoin Unlimited" allows all the needed transactions on block for people to use even if it creates a fee market, the implementation of side chains for smaller blockchain for say a Venezuela cryptocoin where transactions costs are marginal in their region, the blockchain to be fast and smooth if that means LN and Segwit.

I personally don't think a need for more than 32 MB will ever be needed if that happens but it should be increased responsibly and with as much attention to detail as possible. I really think Craig Wright was working on this before WTF happened.

I use my Swift card daily and if there are these type of services some feel comfortable to use then do so but we need to allow those who don't want to access to the blockchain.

 

[cypherdoc]

@cypherdoc

Multisig is a property of each input and output. A transaction can be composed of any number of inputs and outputs, and each of those inputs and outputs can be "standard" or multisig.

Multisig inputs have larger signatures that "standard" signature inputs. So segwit will also tend to favor transactions with multisig inputs, following similar reasoning as above.

OK, then who (which economic actor will execute these txs) in your estimation is benefiting most from this consolidation of multiple inputs to fewer outputs with SW?

 

[Erdogan]

There is no need to emulate the money system of Venezuela in bitcoin, it is a failed currency, in fact we need no country specific money, it's a drag. We are making the new world money forchrissake.