I think this might be an answer to my previous question, but I don't understand the part "this would be like monetary inflation, as high value SC networks grow sucking up Bitcoin". Are you saying because the SC draws mining power away from the main chain, this is also sucking value from the mainchain tokens?
Somewhat, if value is created on a SC that is greater than that of Bitcoin the Bitcoin stays there. SC would be unlucky to draw mining power away from Bitcoin while block rewards are high and it's the dominant chain. One could script mine SC-tokens I'm sure there will be PoS versions too. (Maybe a script miner who gets fees from a script SC is content building his mining farm and not supporting the Bitcoin network in that way he's investing in the SC security and not Bitcoin security in a small way he'd be drawing mining power away from the Bitcoin network)
What I'm saying is SC will be designed to be more efficient, and will need to attract users and and miners. First users want cheaper transaction, then miners want profit for security. So whoever gets the best mix grows.
In the Bitcoin incentive structure the industrial energy used to hash grows with the value of BTC, over time this is reduced to the marginal cost of protecting the network, it will fall into equilibrium with the increase and decrease in BTC value. That changes with SC.
Decentralized SC that function as a means of exchange and use merged mining will probably offer the most security miners will mine all viable ones and the difficulty will be in close equilibrium with Bitcoin. They can be thought off as secure as Bitcoin.
The SC with the lowest cost and biggest network will grow reducing the need for other Decentralized SC's, the result is Decentralized SC will either compete on fees as they are as secure as Bitcoin, or they'll compete on utility and charge a premium. The users will go wherever it's most cost effective to exchange value, on the SC an increase in value is reflected in the price of Bitcoin, however that increase in value is attributed to being the biggest network with the lower fees, this increase in BTC value won't be reflected in mining revenue because it comes at the expense of sacrificing profits, leaving the network less secure.
The SC that offer additional utility at a premium or greatest arbitrage will alow miners to grow and secure the network, that hashing power is distributed over the whole network, those coins that earn the most for miners, when this type of growth happens will incentivized to mine those SC, they will drive new investment in mining and become more secure. In this case this network will be growing and Bitcoin and other SC will be getting the benefits of added security. This growth is inflationary taking value out of Bitcoin, the market locks it in. I'd only consider the growth inflationary because that is value on top of Bitcoin in that scenario Bitcoin is dragged up but it's not the source of the growth.
If either scenario gets a stronghold you can expect the incentive to become exaggerated, neither is good for Bitcoin.
