

Enabling Blockchain Innovations with Pegged Sidechains [pdf] - nvk
http://www.blockstream.com/sidechains.pdf

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drcode
This paper is a HUGE DEAL in the bitcoin community. Sidechains in theory could
address lots of the scalability issues of Bitcoin and could accelerate the
roll out of new features.

However, there are many strong opinions on both sides as to whether sidechains
are desirable and/or technically possible.

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maaku
I'm one of the co-authors. AMA.

EDIT: There will also be a reddit AMA on Thursday at 12pm eastern time.

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jc123
Why so soon? It doesn't give people much time to read, think, ponder.

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maaku
We're always open to questions! But some people have some immediate concerns
and we'd like to address those right out of the gate.

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ericb
Some interesting criticisms here:
[http://www.reddit.com/r/Bitcoin/comments/2k070h/enabling_blo...](http://www.reddit.com/r/Bitcoin/comments/2k070h/enabling_blockchain_innovations_with_pegged/clgqdeu)

~~~
mpyne
I find the proposal that Bitcoin may want to setup central authorities (that
can be federated) to support 2-way sidechains more. A lot of the Bitcoin
luminaries now seem to be coming around to the idea that regulation is OK and
that trusting authorities (instead of just math) isn't the end of the world.

But that raises again the question of why one would use a value-transfer
system designed to be wasteful of electrical power (with the amount of waste
going up as Bitcoin price goes up) instead of a distributed network that
handle secure value storage/transfer as efficiently as possible. E.g. patio11
has described such a system (Stellar,
[https://www.stellar.org/](https://www.stellar.org/)) and while I don't know
enough about Stellar to speak intelligently about it, even without Stellar
there's good ol' fiat-based networked systems. Visa alone can handle 47,000+
tranx/sec vs. Bitcoin's 7.

It seems to me that Bitcoin's unique strengths have been reduced to
international remittance use case, and even that appears subsumed by Stellar
(and if Stellar doesn't pan out, by existing money remittance services who can
easily drop their cost below the equivalent cost to transact in Bitcoin,
unless Bitcoin suffers an extreme price drop).

The only other area I see is that Bitcoin will become simply a digital
commodity (a virtual gold or silver), but if this happens the price
speculation would destroy the usefulness of Bitcoin as a unit of account and
as a means of efficiently exchanging value.

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maaku
> A lot of the Bitcoin luminaries now seem to be coming around to the idea
> that regulation is OK and that trusting authorities (instead of just math)
> isn't the end of the world.

That definitely deserves a citation needed. Accepting regulation? Yes, sure.
"Trusting authorities (instead of just math)"? Absolutely not. If you are ok
with that, then why use bitcoin at all? A simple ledger on a central server
works just fine and saves a lot of trouble.

The federated two-way peg is at best a temporary measure. The first most
obvious improvement is to conjunctively add the SPV security trustless peg as
well, such that using a peg requires signatures of the functionaries AND a
valid proof. Then the worst they could do is freeze your coins, which we're
still not happy with.

Another improvement not in the paper is to spread the functionaries out into
multiple jurisdictions and selected from multiple distrustful groups. E.g. it
would be nice if there were functionaries in Iran and China as well as the
U.S. and Europe.

> E.g. patio11 has described such a system (Stellar)

Stellar's consensus algorithm (the same as Ripple's) is broken by design. It
will not work as advertised, and provides little better security than the
existing fiat system.

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pa2013
Can you say a bit more about what's wrong with Ripple's consensus algorithm?
Or link to a critique?

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socrates1024
My opinion is the Ripple consensus algorithm doesn't yet meet the security
claims its stated to in their whitepaper. There's an ongoing discussion here:
[https://forum.ripple.com/viewtopic.php?f=2&t=7801#p56432](https://forum.ripple.com/viewtopic.php?f=2&t=7801#p56432)

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ebel
Excellent explanation of how Bitcoin works and its shortcomings. Bit of a
Bitcoin newb, but how are decisions currently made in regards to implementing
new features? Are Alt-Coins similarly hard to change (mostly thinking about
Litecoin) ?

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bdcs
Ultimately it comes down to every node defining what they consider a bitcoin
or Xcoin. Suppose we're the only two nodes on the network and we disagree
about what a bitcoin is (we're running different validation code, either
intentionally or not). You'll mine some ebel-coins and I'll mine some bdcs-
coins. We won't agree that they are bitcoins and so we'll have a blockchain
fork.

So yes, changing anything (hard-fork) is very difficult because it requires
100% consensus to be done well. Two-way pegging is technology that allows
almost endless permissionless innovation on top of bitcoin WITHOUT requiring
consensus. This is killer. I cannot wait to see what comes of this.

There is now a huge space to be filled for dev APIs and useful abstractions
for creating, running, and updating side-chains.

~~~
patcon
> So yes, changing anything (hard-fork) is very difficult because it requires
> 100% consensus to be done well.

I'm fairly certain this isn't the case. It needs 51% to be done (nevermind
done "well"), and then in theory more and more miners will cut their losses
and start operating under the winning chain's rules.

Unless by "done well", you mean that transacting users and merchants aren't
inconvenienced. Because a hard fork battle would be inconvenient for commerce
if it wasn't a large majority. But miners don't necessarily need to care about
that :)

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maaku
There's a distinction here between soft-forks, which require majority mining
hashpower and a definite super-majority to avoid possible transition risks,
and hard-forks which absolutely require every node on the network to upgrade.

