Topic: Gold collapsing. Bitcoin UP. - page 696. (Read 2032265 times)

Thanks for this.
Value = convertibility + utility
And in all 3 examples is decided by market forces.

Failure modes are usually one of the best places to start looking for the hooks.
How does something fail?  How can it be made to fail most safely, and in what ways can it not be made safe?

I would consider the effects of different failure modes on these scenarios.
They start with the assumption that the 2wp is broken and that convertibility is lost but this can happen in many different ways and for different causes.
The BTC may remain locked or not in different types.  If locked and no convertibility they are burned and deflate BTC, or they may be unlocked and re-inflate BTC.  Or there are hybrids.

In one of the previous examples we had:

 MC
 |   \
SC₁ SC₃
 |   /
SC₂

Where SC₁ had rogue devs/miners who inflated it with new assets or subverted the proofs so no SC₂ would convert back to SC₁ and so convertibility was lost.
Subsequently SC₃ is set up to restore convertibility because SC₂ had such utility that it kept going and new owner folks wanted to (somewhat) regain the convertibility aspects (including new issuance from SPV).

So now you have SC₂ with some BTC convertible back to MC and some not.

the whole point that Peter R is trying to make is that with SC's, value gets "shared" btwn MC and all SC's.  with the potential of being "severed" or "fragmented". 

we don't want that with Bitcoin.  we want it ALL on the mainchain.  we want all outsiders to be forced to "buy in" to BTC for their seat at the table.

who here wants to share value with Truthcoin?

Peter R, what if scBTC#1, scBTC#2 and scBTC#3 is still same BTC and has equal value in all chains b/c 2wp works ?
Transfering BTC from chain to chain is only "thought experiment". I have never seen or touched Bitcoin -> b/c it is only private key.

I think this is right. The same using other words: There is a separate value for the scBTC. When the peg is broken, this value is revealed. It also means that while the peg is intact, the holding preference would be with bitcoin in cases #1 and #2, and with scBTC in case #3. This will suppress the usage of scBTC #1 and #2, and may render them less and less liquid.

The problem for scBTC in case #3, is that it first will have to survive a period with less freefloating value, so it will have a problem achiveing the status of #3.

this is, imo, problematic for BTC holders in #2 and #3.  the realization that BTC value units now have the potential to "leak" from what's supposed to be a self contained firewalled off system will destroy Bitcoins Sound Money function.  right now, i could buy gold and throw it in a safe and never access it for the rest of my life and, in the absence of the Bitcoin alternative, be confident that it would retain its value.  in your demonstrated scenarios above, i could NEVER count on that.  therefore, the natural conclusion is that Bitcoin would NOT be Sound Money.

i don't see jewelry as a transformation of gold itself.  the added on value is the beauty that's crafted into gold jewelry.  the original gold supply still hasn't changed.

I also think they are working on it.  I recently got the bounty for Namecoin integration (which I did) paid out.  Nowhere close to 500 BTC, though.

The reason you're not hearing much about OT is that Monetas is spending a lot of time working on voting pools, which are a hard problem to solve and also a backend technology.

When exchanges start using voting pools to handle customer deposits, there will be a great many OT users who won't even realize they're using it.

it gets transformed into jewelry, btw, this then becomes its intrinsic value that drives demand,  the new demand pulls up the price win win. 

This is a very interesting theoretical question: "where is the value stored for a sidechain?"  

Let's do a little thought experiment to try to come up with a reasonable answer.  The purpose of the thought experiment is to isolate the effect of the 2-way peg; it's meant to be a tool to help us understand where the value is actually stored, and not meant to represent plausible future scenarios.  We'll ask what happens to the value of scBTC should the 2-way peg be instantly and permanently severed (and the locked BTC on the main chain frozen).  If one argues that the value is always stored on Bitcoin's Blockchain, then I think in all cases the value of scBTC should fall to zero.  It's pretty clear to me that that won't actually happen in all cases:

Case #1: Small sidechain backed by 0.01% of the main-chain BTC

Here we have a small sidechain used, perhaps, for experimentation with faster confirmation times.  Very little real economic activity takes place on this side chain.  When the 2-way peg is severed, I believe the value of scBTC#1 would drop rapidly to zero, as everyone would realize that another sidechain employing the same features but maintaining the BTC backing could easily be recreated.  The network effect is too small to matter.

--> value is stored on Bitcoin's Blockchain.

Case #2: Large sidechain backed by 10% of the main-chain BTC

Here we have a large sidechain that perhaps employs ring-signatures for improved anonymity.  This scBTC#2 has become the token of choice for black-market activity such as the purchase of illicit goods from SilkRoad 3.0.  When the 2-way peg is severed in this case, the value does not fall to zero. The value immediately drops, because many individuals would prefer to hold BTC than unbacked scBTC#2.  However, it does not drop to zero because speculators and scBTC#2 users realize that the huge network of users and wallet infrastructure already set up to accept scBTC#2 will maintain demand for unbacked scBTC#2.  scBTC#2 becomes an alt coin and trades with a floating exchange rate with respect to main-chain BTC.

--> value is stored in both Bitcoin's Blockchain and the sidechain ledger.  

Case #3: Uber sidechain backed by 60% of the main-chain BTC

Here we consider the case where the majority of bitcoins are stored on the sidechain.  Perhaps this sidechain is just "better" than bitcoin, and there's a huge push by merchants to move all economic activity here.  Speculators also decide to move their BTC to this sidechain, as they fear that a severing of the 2-way peg would hurt the value of their main-chain BTC (they see that the network-effects of this sidechain are becoming greater than Bitcoin's).  Now when the 2-way peg is severed, I would argue that it would be the value of bitcoin that would fall and the value of scBTC would actually rise!  Scarcity of scBTC#3 is actually greater once the peg is severed (no more main-chain BTC can be converted) and since the majority of economic activity is taking place on this chain, the ledger for scBTC#3 becomes the dominant "memory" for our money.    

--> value is stored mostly on the sidechain ledger.  


Once again, the purpose of this thought experiment was not to propose "realistic scenarios"; the purpose was to help answer the question "on which ledger is the value stored?"  I think the answer is that for low-levels of adoption, the value remains stored on Bitcoin's Blockchain.  But as the network effect of the sidechain grows, a larger component of the value is actually stored on the sidechain's ledger.  

bang on. also explains the long bull market, metaphorically, VC,s will get to a stage like early mining, at some point its better to invest in BTC than it is to try and make earn it.
the idea isn't to disrupt the economy, its to disrupt the financial system used to run the economy.

Bitcoin is a risk distribution virus, more powerful than any biological weapon, it assimilates and leave a working economy in its wake, all we have to do is protect the DNA that makes it work, punting economic energy into Bitcoin is how it grows.  

an analogy to the self contained financial system that i envision with Bitcoin is gold.

there is a finite amount of gold circulating throughout the world.  it's stored, it's used, it's supply is theoretically immutable.  none of it gets "transformed" to other speculative assets at any time.  and for 5000 yrs it served as the basis for a sound money system. 

by promoting the transformation of BTC units over to "different less secure ledgers" which now seems to be accepted here by even brg444, how is Bitcoins Sound Money function sustained?

(fixed link)

Yeah, here's the indicative quote from Pandit (talking about Coinbase): "It's a wallet for bitcoin, but could be a wallet for 'bityen'. It could be 'bitdollar', it could be 'biteuro' – doesn't matter," said Pandit.

It absolutely DOES matter!

Paging Tim Draper. Excellent dollar-cost-avg opportunity.

haha, another Fed auction:

http://www.usmarshals.gov/assets/2014/dpr-bitcoins/

you can see that even Vikram Pandit doesn't get it.  remember, the only reason ppl mine for or use a new alternative currency like Bitcoin is b/c it is a SOV that can't be inflated or transformed by inflationary gvt policies or something like a spvp:

http://www.bloomberg.com/video/wreckage-of-flight-mh17-removed-from-crash-site-NQ~D2zzcSW2oOXBCZFr_2g.html

perhaps this is the break that OT needs as the SC federated server model is forcing all of us to understand and consider such a system as an alternative.

you want these guys to "buy in" to the Bitcoin system buy purchasing BTC units which they can then use for their own purposes.  you don't want them to "siphon" value out of Bitcoin by breaking its Sound Money principles by breaking the link btwn the currency unit and its blockchain.

i know you know this but i'm just clarifying how i see these developments.

i think its going strong, its the best solution not a failed one.

forgot point #4:

4.  Daniel, back in March when he gave this talk, viewed the core dev system at the time as too centralized.  this was before Blockstream and the WP came out a month ago.  if you agree with him, how does further centralizing the 40% of core devs +3 of the top committers into one for-profit company help, especially when its core business model is to sell SC construction to SC entities all of whom might be unfriendly to Bitcoin proper?