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Mining is entirely up to the sidechain. A simple sidechain could be merge mined with bitcoin, and offer no block reward (only transaction fees). This would allo

Mining is entirely up to the sidechain. A simple sidechain could be merge mined with bitcoin, and offer no block reward (only transaction fees). This would allow the 1=1 exchange rate to be maintained. If a different block reward is created, then the sidechain would need to be inflationary (either the relative value of all bitcoin in the sidechain will need to decrease, or in a network which natively supported multiple asset types, the block reward could be denominated in a currency other than BTC). Either way, the bitcoin blockchain will not allow more money to be withdrawn from the sidechain than was put into it, so the sidechain creators must come up with exchange rules which are fair to both those who import BTC into the sidechain, and to the miners.

williamcotton 12y ago
How can Bitcoin trust the sidechain? How does the Bitcoin network keep track of the total currency amount and therefor the inflation on the sidechain?
- jdmichal 12y ago
  The Bitcoin chain only has to know how many Bitcoins exist in the sidechain, and only that number of Bitcoins is permitted to be resurrected from the sidechain's dead address. The rules for how units in the sidechain relate to units on the Bitcoin chain don't matter; as long as the work is done to resurrect a Bitcoin on the Bitcoin chain, then it will be resurrected and decremented from the sidechain's count.
  - williamcotton 12y ago
    Step through this with me... I've got 5 Bitcoins. I transfer all of them to a new sidechain for 50 Sidecoins. This Sidecoin sidechain has a different block reward. Let's say 3 weeks go by. Now there are 10,000 total Sidecoins. Let's say I've got 2,000 of those Sidecoins because I've sold the rest. How do I convert them back to Bitcoins? Can I only transfer 50 back? Can I transfer all 2,000 back? What are they worth in Bitcoin now?
    - jdmichal 12y ago
      You freeze your 2000 Sidecoins. That is then converted into some number of Bitcoins, the conversion of which is entirely dependent on how the Sidecoins work. (Likely the ratio of the number of Bitcoins dedicated to the sidechain to the number of existant Sidecoins.) A transaction is then submitted to the main chain, submitting the required proofs that you have frozen / destroyed the appropriate amount of Sidecoins to unfreeze a number of Bitcoins. If the number of Bitcoins trying to be created exceeds the number committed to the sidechain, the transaction will fail. Otherwise, it will succeed.
      - williamcotton 12y ago
        So the main Bitcoin network needs to be aware of and to be able to analyze the entire Sidecoin sidechain? So if only a total of 5 Bitcoin were ever sent/frozen to the sidechain, then only 5 Bitcoin can ever be retrieved/unlocked? So when the Sidecoin sidechain was first created each Sidecoin was worth 0.1 Bitcoin. So after three weeks there are now 10,000 Sidecoins, each worth 0.0005 Bitcoin? Is this a general rule for sidechains? Why did you say "likely"? Is that because none of the details of sidechains have been worked out? Transactions on sidechains are mined in to blocks, right? So if someone mined 8,000 Sidecoins of those 10,000, they've now got 4 Bitcoin? If someone then sent/froze an additional 5 Bitcoin to the Sidecoin sidechain, then that would generate 10,000 new Sidechains? So the incentives to mine Sidecoins would correspond to the total number of Bitcoin that has been sent to the sidechain? If 5 Bitcoin were only ever sent to Sidecoin, then all the mining in the world could only ever lead to a total of 5 Bitcoins? So for Sidecoins to be economically viable and therefor functional, someone would need to be constantly injecting Bitcoin in to the sidechain, right?

williamcotton 12y ago

How can Bitcoin trust the sidechain? How does the Bitcoin network keep track of the total currency amount and therefor the inflation on the sidechain?

jdmichal 12y ago
The Bitcoin chain only has to know how many Bitcoins exist in the sidechain, and only that number of Bitcoins is permitted to be resurrected from the sidechain's dead address. The rules for how units in the sidechain relate to units on the Bitcoin chain don't matter; as long as the work is done to resurrect a Bitcoin on the Bitcoin chain, then it will be resurrected and decremented from the sidechain's count.
- williamcotton 12y ago
  Step through this with me... I've got 5 Bitcoins. I transfer all of them to a new sidechain for 50 Sidecoins. This Sidecoin sidechain has a different block reward. Let's say 3 weeks go by. Now there are 10,000 total Sidecoins. Let's say I've got 2,000 of those Sidecoins because I've sold the rest. How do I convert them back to Bitcoins? Can I only transfer 50 back? Can I transfer all 2,000 back? What are they worth in Bitcoin now?
  - jdmichal 12y ago
    You freeze your 2000 Sidecoins. That is then converted into some number of Bitcoins, the conversion of which is entirely dependent on how the Sidecoins work. (Likely the ratio of the number of Bitcoins dedicated to the sidechain to the number of existant Sidecoins.) A transaction is then submitted to the main chain, submitting the required proofs that you have frozen / destroyed the appropriate amount of Sidecoins to unfreeze a number of Bitcoins. If the number of Bitcoins trying to be created exceeds the number committed to the sidechain, the transaction will fail. Otherwise, it will succeed.
    - williamcotton 12y ago
      So the main Bitcoin network needs to be aware of and to be able to analyze the entire Sidecoin sidechain? So if only a total of 5 Bitcoin were ever sent/frozen to the sidechain, then only 5 Bitcoin can ever be retrieved/unlocked? So when the Sidecoin sidechain was first created each Sidecoin was worth 0.1 Bitcoin. So after three weeks there are now 10,000 Sidecoins, each worth 0.0005 Bitcoin? Is this a general rule for sidechains? Why did you say "likely"? Is that because none of the details of sidechains have been worked out? Transactions on sidechains are mined in to blocks, right? So if someone mined 8,000 Sidecoins of those 10,000, they've now got 4 Bitcoin? If someone then sent/froze an additional 5 Bitcoin to the Sidecoin sidechain, then that would generate 10,000 new Sidechains? So the incentives to mine Sidecoins would correspond to the total number of Bitcoin that has been sent to the sidechain? If 5 Bitcoin were only ever sent to Sidecoin, then all the mining in the world could only ever lead to a total of 5 Bitcoins? So for Sidecoins to be economically viable and therefor functional, someone would need to be constantly injecting Bitcoin in to the sidechain, right?