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Offline cob

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DPOS DACs as bitcoin sidechains?
« on: April 29, 2014, 04:55:25 AM »

My daily mind numbing tasks are always assisted by LTB podcast.
My midnight reading has been coindesk.
This got me thinking more and more about sidechains.
I think they might be onto something here. It appears to be WAY more promising than mastercoin or any other protocol built on top of bitcoin.
Bitcoin of course is an unprofitable DAC that pays miners for security. So here is my question to those with a better grasp of all of this.

Do you think there is a way to make a profitable DAC of a sidechain? Where shares aren't diluted, inflation is absent from the sidechain DAC and people can still get their coins in and out of the side chain via the 2 way peg.
This would eliminate exchanges and open up the market of each DAC to everyone using btc.

Thoughts?
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Offline bytemaster

Re: DPOS DACs as bitcoin sidechains?
« Reply #1 on: April 29, 2014, 12:58:50 PM »
Side chains are fundamentally insecure and must be approved by the BTC mining majority...

Until I see something to the contrary, all it appears to be is a means for the Bitcoin elite to extend the BTC protocol and makes sure they retain control.   Therefore, I would not even begin developing a DAC for a side chain... it would be like building a BTC wallet for the Apple store only to have it rejected by Apple.


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Offline cob

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Re: DPOS DACs as bitcoin sidechains?
« Reply #2 on: April 29, 2014, 05:01:55 PM »
Side chains are fundamentally insecure and must be approved by the BTC mining majority...

Until I see something to the contrary, all it appears to be is a means for the Bitcoin elite to extend the BTC protocol and makes sure they retain control.   Therefore, I would not even begin developing a DAC for a side chain... it would be like building a BTC wallet for the Apple store only to have it rejected by Apple.

What about if Bitcoin where DPOS?

Or

Let's say Bitshares creates a DAC with sidechain capabilities. Do you see any good coming from this? Just seems like it's a way to scale, without having fungibility problems.

You'd have multiple chains, adding different, independent features, to the original DAC with the original shares.
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Offline bytemaster

Re: DPOS DACs as bitcoin sidechains?
« Reply #3 on: April 29, 2014, 07:07:39 PM »
Side chains are fundamentally insecure and must be approved by the BTC mining majority...

Until I see something to the contrary, all it appears to be is a means for the Bitcoin elite to extend the BTC protocol and makes sure they retain control.   Therefore, I would not even begin developing a DAC for a side chain... it would be like building a BTC wallet for the Apple store only to have it rejected by Apple.

What about if Bitcoin where DPOS?

Or

Let's say Bitshares creates a DAC with sidechain capabilities. Do you see any good coming from this? Just seems like it's a way to scale, without having fungibility problems.

You'd have multiple chains, adding different, independent features, to the original DAC with the original shares.

Well lets define what scaling means....
A) not all nodes have to process all transactions.
B) increase raw throughput of transactions.

Side chains, even with BTC require either all miners to process all side chains or to blindly trust POW as a substitute of validation which in turn requires merged-mining of side chains by all miners.    In other words, side chains may relieve the load on the end user, but does not relieve the load on the miners which must still process all transactions.

BitGOLD + Atomic Cross Chain Trading is the best way to move value between two chains in a secure manner that doesn't result in the 'miners' or 'delegates' having to process all possible chains or even authorize all possible chains.   

Because the properties of BitGOLD make it independent of the value of the underlying chain it means you can easily trade   BTSX:GOLD  vs BTSY:GOLD at a 1:1 ratio.   

The only downside is that if you want to move from BTSX to BTSY then you have 3 trades to execute (BTSX to BTSX:GOLD), (BTSX:GOLD to BTSY:GOLD), and (BTSY:GOLD to BTSY).   This would represent some transaction fees.   

Now for users who are only dealing with BitGOLD they can move between chains with perfect fungibility.  As BitGold is likely the best possible money you have what you really want from the sidechains.   

For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline luckybit

Re: DPOS DACs as bitcoin sidechains?
« Reply #4 on: April 29, 2014, 08:04:04 PM »
Side chains are fundamentally insecure and must be approved by the BTC mining majority...

Until I see something to the contrary, all it appears to be is a means for the Bitcoin elite to extend the BTC protocol and makes sure they retain control.   Therefore, I would not even begin developing a DAC for a side chain... it would be like building a BTC wallet for the Apple store only to have it rejected by Apple.

What about if Bitcoin where DPOS?

Or

Let's say Bitshares creates a DAC with sidechain capabilities. Do you see any good coming from this? Just seems like it's a way to scale, without having fungibility problems.

You'd have multiple chains, adding different, independent features, to the original DAC with the original shares.

Well lets define what scaling means....
A) not all nodes have to process all transactions.
B) increase raw throughput of transactions.

Side chains, even with BTC require either all miners to process all side chains or to blindly trust POW as a substitute of validation which in turn requires merged-mining of side chains by all miners.    In other words, side chains may relieve the load on the end user, but does not relieve the load on the miners which must still process all transactions.

BitGOLD + Atomic Cross Chain Trading is the best way to move value between two chains in a secure manner that doesn't result in the 'miners' or 'delegates' having to process all possible chains or even authorize all possible chains.   

Because the properties of BitGOLD make it independent of the value of the underlying chain it means you can easily trade   BTSX:GOLD  vs BTSY:GOLD at a 1:1 ratio.   

The only downside is that if you want to move from BTSX to BTSY then you have 3 trades to execute (BTSX to BTSX:GOLD), (BTSX:GOLD to BTSY:GOLD), and (BTSY:GOLD to BTSY).   This would represent some transaction fees.   

Now for users who are only dealing with BitGOLD they can move between chains with perfect fungibility.  As BitGold is likely the best possible money you have what you really want from the sidechains.
+5%
This post is very insightful. I'd like to learn more about the potential of atomic cross chain transactions. I knew about it before but now I'm starting to think people are dramatically underestimating this feature.

If we can reliably move value from one chain to another then it's going to be an extremely sticky network of chains. Once people put their value into it, it's could be a situation where they don't have a reason to leave except to cash out directly to fiat.


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Offline tonyk

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Re: DPOS DACs as bitcoin sidechains?
« Reply #5 on: April 29, 2014, 08:18:33 PM »
BitGoldAssets + Atomic Cross Chain Trading is the best way to move value between two chains in a secure manner that doesn't result in the 'miners' or 'delegates' having to process all possible chains or even authorize all possible chains.

In other words, if BTS X works as expected, it will be the first DPOS DACs as bitcoin sidechain… if you prefer to look at BTS X like that.
Correct?
« Last Edit: April 29, 2014, 08:27:01 PM by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline bytemaster

Re: DPOS DACs as bitcoin sidechains?
« Reply #6 on: April 29, 2014, 08:50:03 PM »
Bitcoin doesn't support across chain Trading by the major mining pools as far as I know


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Offline JoeyD

Re: DPOS DACs as bitcoin sidechains?
« Reply #7 on: April 29, 2014, 09:08:18 PM »
For now there is not much we can do then speculate how sidechains work, until a whitepaper or working code has been published.

I don't want to downplay the risks Bytemaster mentioned about the current emerging power-struggles and increasing centralization. And I'm also very worried about the way sidechains and lazy implementations of this idea could increase centralization, especially when large numbers of people just blindly follow. But I don't think the idea itself is only useful for increasing the power of miners.

As far as I understand it the sidechain concept is actually closer to atomic crosschain trading than it is to merged mining. The latter being just one of the ways a sidechain could be setup, but it does not appear to be a requirement. The difference with crosschain trading is that the marketprice is fixed and coins are created or destroyed in the "trade" by respectively locking up or freeing bitcoins/mainchain. Supposedly smart-contracts on the bitcoin network can be read and affected from these sidechains, but other than validating these smart-contracts I don't think the idea absolutely requires the miners cooperation or hashing power for its own chain. At least that's what Adam Back wrote himself, how he actually expects to be able to do that has yet to be explained. I'm very curious myself how he intends to solve this without both blockchains needing to keep track of each other.

Even if there is no merge mining, this does leave among others the problems of economy and security. Such as, how do you setup such a separate blockchain-network and ensure its reliability and robustness by trying to figure out a system of incentives for keeping the network plus security up and running plus paying for development either with just transaction fees and at the same time still being interesting/valuable enough for people to want to pay those fees, or by some external fundraising/sponsoring. The latter would imply a very centralized solution, but I could come up with several examples where some entities or corporations would want it. (For example a group of companies having the same very specialized needs, but still wanting to seamlessly integrate in the mainchain, without wanting to setup an exchange, or something like token-tickets for a public transport system etc.) It would also have to be able to deal with massive changes in the amount of tokens on its network, which might be particularly difficult in the edge case just after the inception or just before the death of a sidechain.

I like ByteMasters concept of modularity a lot more. It makes each DAC/blockchain more selfsupporting and independent and makes things less confusing. While cooperation and free interaction is a good thing, interdependence most definitely is not. Also in case of competition the difference in profitability or exchange-rates, would (I imagine) make evaluating each chain on its own merits a lot easier.

As I mentioned at the start, we'll have to wait and see. Maybe the sidechain proposal offers some new insights and hopefully parts of it can also be adapted to help improve cross chain trading or help facilitate interactions between chains.  The ability to have smart contracts on one blockchain/DAC be able to in a decentralized and secure manner affect smart-contracts on another blockchain/DAC does open up a lot of extra possibilities and makes the mind wander. DACs managing parts or even whole sets of other DACs?
« Last Edit: April 29, 2014, 09:25:16 PM by JoeyD »

Offline Empirical1

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Re: DPOS DACs as bitcoin sidechains?
« Reply #8 on: April 29, 2014, 09:12:46 PM »
My technical understanding of these things is pretty limited but I don't think sidechains can compete.

All the volume the sidechain generates, benefits BTC holders and not holders of the shares in the sidechain.
Shareholders in a sidechain can only generate income via transaction fees or or other fees charged to users of the product/service the sidechain offers.

While a separate DAC on the other hand would experience share price growth as daily trading volume conducted in their shares increase in direct proportion to the amount of customers/users they attract. As a result the separate DAC can offer customers reduced or no fees during the product/service growth phase which a BTC sidechain can't compete with. 

Offline BldSwtTrs

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Re: DPOS DACs as bitcoin sidechains?
« Reply #9 on: April 29, 2014, 09:32:41 PM »
Bitcoin doesn't support across chain Trading by the major mining pools as far as I know
Here: http://www.mail-archive.com/[email protected]sourceforge.net/msg04388.html
Peter Todd says: But moving value between chains is inconvenient; right now moving value requires trusted third parties. Two-way atomic chain transfers does help here, but as recent discussions on the topic showed there's all sorts of edge cases with reorganizations that are tricky to handle; at worst they could lead to inflation

What does it means by regorganizations that are tricky to handle and that it could lead to inflation?

Offline bytemaster

Re: DPOS DACs as bitcoin sidechains?
« Reply #10 on: April 29, 2014, 09:40:33 PM »
Bitcoin doesn't support across chain Trading by the major mining pools as far as I know
Here: http://www.mail-archive.com/[email protected]/msg04388.html
Peter Todd says: But moving value between chains is inconvenient; right now moving value requires trusted third parties. Two-way atomic chain transfers does help here, but as recent discussions on the topic showed there's all sorts of edge cases with reorganizations that are tricky to handle; at worst they could lead to inflation

What does it means by regorganizations that are tricky to handle and that it could lead to inflation?

I think it means that because a bitcoin blockchain can reorganize up to 100 or more blocks at a time that even an apparently successful trade could be undone in the right circumstances.

To prevent this kind of behavior  ACCT would require almost 48 hours to execute with security against almost all of the corner cases.

With DPOS we can gain security against all of these corner cases in less than 1 hour.
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Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline luckybit

Re: DPOS DACs as bitcoin sidechains?
« Reply #11 on: April 29, 2014, 11:09:35 PM »
Bitcoin doesn't support across chain Trading by the major mining pools as far as I know
Here: http://www.mail-archive.com/[email protected]/msg04388.html
Peter Todd says: But moving value between chains is inconvenient; right now moving value requires trusted third parties. Two-way atomic chain transfers does help here, but as recent discussions on the topic showed there's all sorts of edge cases with reorganizations that are tricky to handle; at worst they could lead to inflation

What does it means by regorganizations that are tricky to handle and that it could lead to inflation?

Some people believe that altcoins existing at all is a type of inflation. They want 21 million units of cryptocurrency to exist and for us all to be locked onto the Bitcoin pyramid with no escape. I'm not feeling that idea because that to me is almost turning Bitcoin itself into a sort of government where you are like a citizen of the chain and cannot move to or start another country.

So people make altcoins when Bitcoins become too expensive. This could be viewed as inflation of the total tokens of the cryptocurrency space. I don't really see it that way when we think of it as coins and decentralized companies but if we think of it as currencies it's a totally different set of rules and metaphors.

I don't know if that is the sort of inflation he was talking about but it's my best guess. Most people in support of the side chain idea from my interaction are not fans of altcoins. Peter Todd is working on tree chains which is better explained but has a similar capability and functionality to sidechains.
« Last Edit: April 29, 2014, 11:14:39 PM by luckybit »
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Offline bytemaster

Re: DPOS DACs as bitcoin sidechains?
« Reply #12 on: April 29, 2014, 11:36:57 PM »
Here is the main thing.... with DPOS we no longer have to worry about bandwidth or disk storage resulting in centralization because there is no longer any vendor lockin, those producing the blocks can be fired, etc.   

So I submit that eventually 100 delegates could be elected to host servers with the bandwidth required to process 10K transactions per second.   

For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline santaclause102

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Re: DPOS DACs as bitcoin sidechains?
« Reply #13 on: April 29, 2014, 11:46:33 PM »
Quote
Some people believe that altcoins existing at all is a type of inflation. They want 21 million units of cryptocurrency to exist and for us all to be locked onto the Bitcoin pyramid with no escape. I'm not feeling that idea because that to me is almost turning Bitcoin itself into a sort of government where you are like a citizen of the chain and cannot move to or start another country.
Totally agree!

Isn't the bare fact that it is possible to create bitcoin copies and improve on them a completely sufficient proof that the currency metaphor is not appropriate but the company metaphor (Bitcoin as a company, http://www.youtube.com/watch?v=ZT9ICMfUDjk) is? Currencies as we understand them and as the coin limitation assumption implies are state issued and because the state issues only one currency which has to be accepted everywhere it is limited in supply - the guarantee that it is accepted everywhere is the only (but sufficient) thing that gives fiat currencies value. On the other side, companies naturally have competition from other companies that try to innovate and improve on the technologies applied by the company that was first. You can call it value transfer network or company I am fine with both terms.

In the end the value of a crypto currency is determined by (magic formula): Technological superiority * Network effect (network effect = degree of innovation (=being the first to introduce the innovation) * success in marketing) = network/company value
« Last Edit: April 30, 2014, 05:06:37 AM by delulo »

Offline luckybit

Re: DPOS DACs as bitcoin sidechains?
« Reply #14 on: April 30, 2014, 02:39:51 AM »
Quote
Some people believe that altcoins existing at all is a type of inflation. They want 21 million units of cryptocurrency to exist and for us all to be locked onto the Bitcoin pyramid with no escape. I'm not feeling that idea because that to me is almost turning Bitcoin itself into a sort of government where you are like a citizen of the chain and cannot move to or start another country.
Totally agree!

Isn't the bare fact that it is possible to create bitcoin copies and improve on them a completely sufficient proof that the currency metaphor is not appropriate but the company metaphor (Bitcoin as a company, http://www.youtube.com/watch?v=ZT9ICMfUDjk) is? Currencies as we understand them and as the coin limitation assumption implies are state issued and because the state issues only one currency which has to be accepted everywhere it is limited in supply - the guarantee that it is accepted everywhere is the only (but sufficient) thing that gives fiat currencies value. On the other side, companies naturally have competition from other companies that try to innovate and improve on the technologies applied by the company that was first. You can call it value transfer network or company I am fine with both terms.

In the end the value of a crypto currency is determined by (magic formula): Technological superiority * Network effect (network effect = degree of innovation (=being the first to introduce the innovation) * success in marketing) = network/company value

I think Bitcoin is actually difficult to put in a rigid category (company? country?). I think for some reason Satoshi intended for it to be democratic. I don't know if he intentionally designed it to centralize around miners like this because it basically creates what I can best describe as an unelected government or hierarchy around the Bitcoin protocol. You have some who have esoteric knowledge and because so few people understand how the code works they maintain power as the developers.

If Bitcoin is a corporation then the shareholders should have ultimate power. Bitcoin is not a corporation in the traditional sense. The miners have all the power.

I think in a lot of ways the Bitcoin social architecture and business model is flawed. It could be more democratic and delegated Proof of Stake is that. It could be designed to resist cartels forming, and if the developers were serious they would move away from ASICs (SHA-256) at least. The fact that they want to bring sidechains but keep the ASICs makes no sense.

Sidechains will give more power to miners, pool operators, chip makers, and core developers. This is probably less than 100 people who would benefit and these people cannot be fired or voted out of their positions. Chip makers as long as they keep making chips will always control the hashing power so that none of us can mine profitably, core developers as long as the knowledge is esoteric will have everyone else depending on them and to go with the sidechain idea would that dependency even worse. None of us know how sidechains will work except for the core developers while altcoin developers can essentially start from scratch and don't have to work with them at all.

Bitcoin in my opinion is starting to look a bit like a country. It now has people trying to create borders. They are trying to maintain control over something which was designed not to be centrally controlled. The problem with inflation in my opinion is a blockchain specific problem. We don't want inflation in individual chains but this isn't the same thing as having many different chains.

The reason I say this is because there is plenty of room for wealth creation in ways other than mining. Most altcoins I admit are trash, but there is also a lot of innovation happening on many different levels. Sometimes the altcoin is just a copy and paste but a community forms around it, starts accepting it, building businesses around it, and over time that altcoin has value. I see no reason to say to people in the altcoin that all value has to be trapped in their chain forever.

Enough rant from me, I just don't like the sidechain idea.

Here is the main thing.... with DPOS we no longer have to worry about bandwidth or disk storage resulting in centralization because there is no longer any vendor lockin, those producing the blocks can be fired, etc.   

So I submit that eventually 100 delegates could be elected to host servers with the bandwidth required to process 10K transactions per second.

A sort of democracy is better than a cartel. Cartels are unelected, cannot be fired, and have a monopoly on the power source of the pyramid by controlling the means of production.

In the Bitcoin case they who control the hashing power are unelected. The whole sidechain thing is very suspect. It's like a nation of unelected rulers trying to keep us from escaping by restricting our freedom of movement. Innately I like the fact that there are altcoins because if I don't want to deal with a certain community elite of a particular hierarchy then I'm always free to leave and create or join another.

The freedom to leave is essential. Vendor lock in is what Apple and others have used in the past to try to keep customers. Sidechains seem to be a way for certain people in the Bitcoin community to try to keep a hold of their power (they fear being disrupted).
« Last Edit: April 30, 2014, 02:44:00 AM by luckybit »
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