Adam, would you mind clarifying a few things? I do understand the core blockchain system quite thoroughly, but these side-chain concepts are new to me and I want to make sure I understand. Correct me if I'm wrong, but a federated peg would be easier to implement than a SNARK peg or a SPV peg, right? No hard or soft fork? But on the other hand, am I correct to assume that the failure points of a federated peg are theoretically more dangerous?
Moreover, as one whose company is currently developing private mining hardware, how do these peg/token side chains directly affect the bitcoin mining protocol (in terms of the block header's nonce, merkle root, etc), if at all? Absent a fork, nothing changes?
If you would allow me to chime in only because it offers an opportunity to propose REAL potential problems with sidechains and not phony simplistic self-serving nonsense ones.
As I see things, sidechains effect Bitcoin simply as large, well funded, often fairly active whales. Nothing more, and it doesn't matter how they work in their own back-ends (chains, tokens, ledgers, distributed, proprietary, whatever.) These whales happen to really really really want Bitcoin to work because their lives depend on it (with one exception shown below.)
Problems:
1) being well-funded, the whales could crowd out other users of native Bitcoin.
2) these whales might get into battles with one another and try to use native Bitcoin as a cudgel causing collateral damage.
3) One whale might become so successful it may at least think it can swallow Bitcoin whole and take over (what I call 'shooting the moon.')
I'll defer to Adam on the number of sidechain implementations he sees. He's stated it as a small integer as I recall. I would hope for many more in part because it would help to mitigate against some of the potential problems I see.
There are many brilliant people working on crypto technologies, but they are so in love with the technology and with their own ideas, they neglect to consider how their academic, theoretical work may apply to the world of finance. After all, bitcoin directly relates to finance. Whether one considers bitcoin money or a commodity or a hybrid thereof, it unequivocally falls in the realm of finance just as much as it falls in the realm of programming, hacker culture, and crypto maths. I like all this stuff, so it's easy for me to get excited and follow along, but as a finance professional, I also see the other, sorely neglected side of the proverbial coin. The disconnect is enormous. (They would make great quants, haha.) I too often see bitcoin's brightest minds focusing on the minutiae of esoteric problems, while not unimportant, are not the immediate issues bitcoin merchants and users are interested in.
Your post about a "whale" disrupting things is very interesting and not as far-fetched as some would believe.
At this point, I think it's very important for people working on Bitcoin, sidechains, and all blockchain-related technologies, whatever they may be, to clearly state in lay terms WHY their work is important and necessary, which is to say, what problems their proposed solutions solve. Satoshi was very good at this.
I also will defer to Adam on sidechain implementation. He seems to have an incredible and deep grasp of how they may function.
