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I agree with all that you have said.
Maybe I need to expand on my thoughts one last time in an effort to have you guys consider where I'm coming from.
I believe that Bitcoin, as is, is the closest form of perfect money we have ever seen.
Its shortcomings, or areas for improvement, in my opinion are as follow :
1. Long confirmation time
2. Privacy (anonymity) option not native as a user-defined option
3. Block size for scaling
4. Possibility that a better mining algorithm exist that could improve decentralization
Aside from the obvious scaling concern, Bitcoin could very well survive as digital gold without seeing any of the improvements I have mentioned. Its fundamentals are THAT strong.
For a long time I envisioned that my previous concerns would be addressed in more centralized type of schemes, or, as some would call it, through off-blockchain transactions.
Now with sidechains, we are provided with the possibility to create these chains that are attached to BTC's mainchain and function in an interoperable way using BTC as their transacting unit, effectively maintaining the ledger.
There, I believe, is our opportunity to create a certain number of sidechains that will work in synergy with the main chain and add considerable value to it.
We do NOT need a BILLION of sidechains. I am in agreement with Adam that it is likely only a relatively small number of them will get the proper developer support and most importantly, miners support. In that regard, I think a lot of people fool themselves into thinking that because the security model proposed in the sidechains paper is merged-mining then all of the sidechains will get this benefit. This is a grave mistake and is exactly why I have been adamant in saying that altcoins booted on top of a sidechain are not, in any way whatsoever, a greater risk to Bitcoin than regular alts are. For this reason, ANY concern that has for a premise the creation of a sidecoin is irrelevant to the discussion as it is NOT enabled by the sidechain proposition.
What we should be discussing and perhaps trying to poke hole in is the use of sidechains as utility features using a unit that is pegged 1:1 with BTC. This, the two-way peg, is the innovation behind the sidechain concept. Everything else has been possible before.
What could these utilities be? Well allow me to return to my list of Bitcoin as money shortcomings :
1. A sidechain allowing for faster transaction times.
2. A sidechain enabling anonymous transactions
My interest in this exercise is Bitcoin as money : store of value, means-of-exchange and unit of account. Traditionally we're looking for these characteristics : scarcity, divisibility, portability, verifiability, recognizability and fungibility. Now, with the proposed sidechains we improve the characteristic of portability (faster transactions) and enable the user-defined additional feature of privacy.
Now cypher here argues that the anonymous sidechain creates a risk for it to potentially to take over as the mainchain. I disagree with that as I see anonymity as a niche market in this world's current settings but I can certainly envision a day where this is no longer true and everyone has a need for 100% private transactions but the day is not now and so that point is moot. Meanwhile the two markets, black and white both can work in synergy and create value for each other.
The same could be said about faster transactions times. At a certain point we might have the technology to make this happen without any security tradeoff but at the moment I believe sidechains is the best decentralized way to go about it.
In this setting, transactions are plentiful in all three chains and miners have an incentive to mine all three of them. The ledger is preserved and there is no dilution or loss of value
Having said all of that, what exactly is the "risk created"? If it is that an innovative new sidechain makes Bitcoin obsolete then should we really call that a risk? Is it a risk to create a better form of money? Is Bitcoin a risk? I guess you could say it is but I think all of us here agree that its added value to society is worth the risk.
brg444, wholly agree with this. I think it is a great summary.
