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If you read Vitalik's post it'll give a very good run down on side chains. http://bitcoinmagazine.com/12349/side-chains-challenges-potential/ http://bitcoinmaga

If you read Vitalik's post it'll give a very good run down on side chains. http://bitcoinmagazine.com/12349/side-chains-challenges-potential/ http://bitcoinmagazine.com/12349/side-chains-challenges-pote... Sidechains have issues in the current incarnation that we have been shown; they need to be mined and a 51% attack on Bitcoin will enable the miner to gain access to the coins that are in the Bitcoin blockchain waiting for release via the two way peg. If these issues cannot be solved then Vitalik may be correct that Ethereum based side chains might actually be a better way as it seems Ethereum is designed to handle this type of advanced contract. Either way, whatever coin (bitcoin or ether) implements these side chains safely and correctly will likely win as being the foundation for the future of cryptocurrency/platforms. The side chain idea allows the native cryptocurrency to compete and win out over other competitors. Want faster confirms? Use side chains. Want Zerocash anonymous transactions, peg into Zerocash and peg back out again. I believe the future will be a battle between Bitcoin and Ethereum with a major war zone being sidechains. Also consider this: If cryptocurrency can have on top of itself many other applications built (decentralised: {web hosting,web app hosting, databases, information, computing engines: {search, math, compute}, contracts, code}) then does that coin itself eventually gain 'intrinsic' value via being the foundation of all these new systems? Imagine a TOR that is based entirely on the greed incentive and not just good will, where the entire system is an Ethereum contract. Imagine an open source google search where the code is run entirely on top of the nodes and each search costs 1 cent in ether to be paid to the nodes for hosting and running the code. If this happens, that coin becomes pegged to a brand new internet running on top of blockchains. Just something to think about.

aaron-lebo 13y ago
Sidechains are being a little overhyped, certainly in the Bitcoin scenario. Part of what drives altcoin innovation is the chance for profit (I guess this drives a lot of innovation). Since Bitcoin sidechains are pegged 1-1, there is no chance for a lot of profit on each sidechain. So if you are starting a new altcoin, what are you more likely to do, create a sidechain where you can't make any money or create a separate currency with all kinds of potential? In fact, much of the same incentive is what is driving the desire to make everything a sidechain. People who are invested in Bitcoin want to keep interest and value there, which is more difficult when altcoins pop up. But why should Bitcoin be the currency, other than it was there first? When you look at some of the PoS coins which are energy efficient and have 10 second blocks compared to Bitcoin's energy-using mining and 10 minute blocks, you have to wonder what would be a better tech going forward (and yes I know about the possibility for attack on PoS coins). But thankfully, we don't have to put all our eggs in one basket. The current system where multiple exchanges exist where you can go from one coin to another very quickly seems to work pretty well. Does everything need to be pegged to a single currency? Second, people need to realize that you can't easily decentralize everything using Ethereum (when it exists). Each node will have a relatively small amount of memory and computing power on it in comparison to more centralized servers and will be slower/more expensive for the same reason. So one example people have used are decentralized exchanges. Wouldn't it be nice instead of having centralized exchanges which can be hacked, corrupt, etc (MtGox), just make them a contract on Ethereum? Sure, if you are okay with making each transaction on your decentralized exchange relatively slow and expensive compared to a good centralized exchange. These kinds of issues will be run into more and more once Ethereum is usable. A lot of things would have seemed like a good fit for decentralization but it is just easier and makes more sense to build a centralized service. Of course Ethereum also will open up a lot of unforeseen avenues as well. Thing is, sidecoins, Ethereum, etc, don't exist (at least not as a live, fully-functioning implementation). Most writings about either right now are "this is what will be possible", "this is what can happen", the dreaming stage. We need to see these things out in the wild to get past hype to reality.
- josephagoss 13y ago
  Very true, we don't need everything to be pegged to a single currency. Another development that will make moving between crypto-currencies more fluid will be decentralized exchanges. I believe that apart from Counterparty and ColoredCoins, Ethereum may also be able to run as a decentralized exchange in fact helping Bitcoin and the other Alternative coins. I assumed a long time ago that eventually many of these coins will somehow tie into each other in the process of building the future foundations of a new decentralised internet. I think that time is coming.
  - jafaku 13y ago
    > Very true, we don't need everything to be pegged to a single currency. Another development that will make moving between crypto-currencies more fluid will be decentralized exchanges. That's not the point. The point is knowing that you won't lose money by trying out altcoins. With sidechains, at any point you can claim back your original bitcoins. You won't be left holding the bag as it happens all the time with separate blockchain altcoins.
    - healingplasma 13y ago
      > You won't be left holding the bag Yeah, unless it's 51% attacked in which case you would lose everything.
- olalonde 13y ago
  > Part of what drives altcoin innovation is the chance for profit (I guess this drives a lot of innovation). Since Bitcoin sidechains are pegged 1-1, there is no chance for a lot of profit on each sidechain. So if you are starting a new altcoin, what are you more likely to do, create a sidechain where you can't make any money or create a separate currency with all kinds of potential? I see this as a good thing. There are just too many people launching non-innovative altcoins with the only goal of getting rich quick or just for the sake of it. As someone who is mainly interested in the technical side of cryptocurrencies, this will allow me to quickly dismiss any altcoin which is not pegged to Bitcoin as a get rich quick scheme (unless they provide a pretty good technical reason). Also, there are tons of incentives (apart from speculation) for creating altcoins, I wouldn't worry too much about about sidechains stifling innovation. On the contrary, it will allow people to use new altcoins without the risk of falling into pump and dump schemes. > But why should Bitcoin be the currency, other than it was there first? There's no other good reason in my opinion. In an ideal world, Bitcoin itself would have been pegged to an existing currency (e.g. USD) to allow for a more fair initial distribution but this was not possible due to the inherent limitations of fiat currencies. I like the concept of PoS/lower block intervals but as far as I know, those are still open problems (and Bitcoin's protocol could be changed over time to incorporate eventual solutions). > But thankfully, we don't have to put all our eggs in one basket. The current system where multiple exchanges exist where you can go from one coin to another very quickly seems to work pretty well. Does everything need to be pegged to a single currency? It works well but it's not a decentralised process which is what sidechains would effectively enable. Of course, some altcoins whose claimed innovation is directly tied to the mining mechanism would still continue to exist independently but this is not the case for most altcoins. PS: People who believe having a theoretical single Currency would be bad thing usually base their argument on assumptions which do not hold in the cryptocurrency world. In the fiat world, the fact that there are multiple currencies is seen as a good thing because governments can manipulate currencies, restrict or impose their use, etc. Those considerations do not apply to cryptocurrencies. I personally believe that having a single cryptocurrency would be a good thing (I know, taboo!). I'm not sure if Bitcoin will be it though.

aaron-lebo 13y ago

Sidechains are being a little overhyped, certainly in the Bitcoin scenario. Part of what drives altcoin innovation is the chance for profit (I guess this drives a lot of innovation). Since Bitcoin sidechains are pegged 1-1, there is no chance for a lot of profit on each sidechain. So if you are starting a new altcoin, what are you more likely to do, create a sidechain where you can't make any money or create a separate currency with all kinds of potential? In fact, much of the same incentive is what is driving the desire to make everything a sidechain. People who are invested in Bitcoin want to keep interest and value there, which is more difficult when altcoins pop up. But why should Bitcoin be the currency, other than it was there first? When you look at some of the PoS coins which are energy efficient and have 10 second blocks compared to Bitcoin's energy-using mining and 10 minute blocks, you have to wonder what would be a better tech going forward (and yes I know about the possibility for attack on PoS coins). But thankfully, we don't have to put all our eggs in one basket. The current system where multiple exchanges exist where you can go from one coin to another very quickly seems to work pretty well. Does everything need to be pegged to a single currency? Second, people need to realize that you can't easily decentralize everything using Ethereum (when it exists). Each node will have a relatively small amount of memory and computing power on it in comparison to more centralized servers and will be slower/more expensive for the same reason. So one example people have used are decentralized exchanges. Wouldn't it be nice instead of having centralized exchanges which can be hacked, corrupt, etc (MtGox), just make them a contract on Ethereum? Sure, if you are okay with making each transaction on your decentralized exchange relatively slow and expensive compared to a good centralized exchange. These kinds of issues will be run into more and more once Ethereum is usable. A lot of things would have seemed like a good fit for decentralization but it is just easier and makes more sense to build a centralized service. Of course Ethereum also will open up a lot of unforeseen avenues as well. Thing is, sidecoins, Ethereum, etc, don't exist (at least not as a live, fully-functioning implementation). Most writings about either right now are "this is what will be possible", "this is what can happen", the dreaming stage. We need to see these things out in the wild to get past hype to reality.

josephagoss 13y ago
Very true, we don't need everything to be pegged to a single currency. Another development that will make moving between crypto-currencies more fluid will be decentralized exchanges. I believe that apart from Counterparty and ColoredCoins, Ethereum may also be able to run as a decentralized exchange in fact helping Bitcoin and the other Alternative coins. I assumed a long time ago that eventually many of these coins will somehow tie into each other in the process of building the future foundations of a new decentralised internet. I think that time is coming.
- jafaku 13y ago
  > Very true, we don't need everything to be pegged to a single currency. Another development that will make moving between crypto-currencies more fluid will be decentralized exchanges. That's not the point. The point is knowing that you won't lose money by trying out altcoins. With sidechains, at any point you can claim back your original bitcoins. You won't be left holding the bag as it happens all the time with separate blockchain altcoins.
  - healingplasma 13y ago
    > You won't be left holding the bag Yeah, unless it's 51% attacked in which case you would lose everything.
olalonde 13y ago
> Part of what drives altcoin innovation is the chance for profit (I guess this drives a lot of innovation). Since Bitcoin sidechains are pegged 1-1, there is no chance for a lot of profit on each sidechain. So if you are starting a new altcoin, what are you more likely to do, create a sidechain where you can't make any money or create a separate currency with all kinds of potential? I see this as a good thing. There are just too many people launching non-innovative altcoins with the only goal of getting rich quick or just for the sake of it. As someone who is mainly interested in the technical side of cryptocurrencies, this will allow me to quickly dismiss any altcoin which is not pegged to Bitcoin as a get rich quick scheme (unless they provide a pretty good technical reason). Also, there are tons of incentives (apart from speculation) for creating altcoins, I wouldn't worry too much about about sidechains stifling innovation. On the contrary, it will allow people to use new altcoins without the risk of falling into pump and dump schemes. > But why should Bitcoin be the currency, other than it was there first? There's no other good reason in my opinion. In an ideal world, Bitcoin itself would have been pegged to an existing currency (e.g. USD) to allow for a more fair initial distribution but this was not possible due to the inherent limitations of fiat currencies. I like the concept of PoS/lower block intervals but as far as I know, those are still open problems (and Bitcoin's protocol could be changed over time to incorporate eventual solutions). > But thankfully, we don't have to put all our eggs in one basket. The current system where multiple exchanges exist where you can go from one coin to another very quickly seems to work pretty well. Does everything need to be pegged to a single currency? It works well but it's not a decentralised process which is what sidechains would effectively enable. Of course, some altcoins whose claimed innovation is directly tied to the mining mechanism would still continue to exist independently but this is not the case for most altcoins. PS: People who believe having a theoretical single Currency would be bad thing usually base their argument on assumptions which do not hold in the cryptocurrency world. In the fiat world, the fact that there are multiple currencies is seen as a good thing because governments can manipulate currencies, restrict or impose their use, etc. Those considerations do not apply to cryptocurrencies. I personally believe that having a single cryptocurrency would be a good thing (I know, taboo!). I'm not sure if Bitcoin will be it though.