Spin-of will create 13M worthless units ... it will take ages and millions(billions) $ until you build solid market cap. (so it never happen, or bitcoin must die)

OTOH SideChain can use same functionality and will use bitcoin market cap. ... has big value from the beginning.

Very valid point.

I recognize the value of sharing the same ledger but this does not necessarily mean the value is shared.

If the ratio is higher than 1:1 then it does create new units. If it is lower than it destroys (or at least locks) units.

The number of units is irrelevant. What matters is the share of ownership.

SC cannot unlock more bitcoins than was locked.  If there is SC what will create new scBTC then
a) some will end up holding scBTC but this cannot be converted to BTC
b) SC must implement some conversion ratio -> consensus of SC participants

Correct, but "units" can be created.

For example, it has been stated that conversion may be a function. For example, a side chain may double its number of units every week while cutting its conversion ratio with Bitcoin in half every week.

No asset of any type can create units of Bitcoin (though changes to Bitcoin-itself could change the number of units as I described i.e. moving the decimal). Units of other assets can and will be created.

Not necesasrily, no. If I create a side chain that isn't mined well, it may be subject to double spend or other chain attacks. It would likely be far less secure than Litecoin.

I can't force anyone to use it, but that is true for any altcoin.

My understanding is that sidechains that do not issue their native currency are not mined but rather the movement of assets between them (transactions) are integrated into BTC's mining blocks

See this quote from the paper :


Can you explain why this is not so?

This is a key point I'd like better understanding on as well.

My understanding is that it is *not* a strict requirement that all units on a sidechains-utilizing ledger generate 100% of their unit-supply via locked bitcoins. I think the passage you quoted was poorly worded, and was just emphasizing that sidechaining can't result in effectively arbitrary asset creation.

Again, back to the key thing sidechaining provides; ie, just a method to specify, at the protocol level, an exchange rate between assets on different sidechain-supporting chains. And back to this exchange rate being definable by "any deterministic function". There can therefore be many sorts of non 1:1 relationships. For example, maybe monero gets "side-chain enabled" for 20% of its future supply, but the other 80% still gets issued as it currently does... Why wouldn't that be possible?

Actually this passage does come with this footnote to be clear :

Indeed.

So here's where I'm landing on this:

1) Sidechains are just a way of defining an exchange rate function at the protocol level.

2) This function can have nearly any definition. Some definitions may serve to economically boost demand for bitcoin, some may not.

3) Sidechained ledgers can span a huge range of economic-entanglement with bitcoin, from just about completely separate (ie, like any other alt), to effectively being 100% "backed" by bitcoin-the-unit.

4) The *HOPE* of sidechain proponents is that many chains will be developed which use an exchange function that creates demand for bitcoin; eg, a function that defines 100% of the new chain's supply in terms of bitcoin.

5) Given that sidechaining makes it possible to create new protocols that are credibly "backed" by bitcoin, the hope is that new protocols which *aren't* backed by bitcoin (ie, "traditional" alts) immediately become suspected of pump-n-dump/profit motives as opposed to pure technological-experimentation motives.


It'll be interesting to see how strongly #4 holds in the market over time.