Topic: Gold collapsing. Bitcoin UP. - page 816. (Read 2032266 times)

the speculator would be converting to scBTC when the price was low.  as he continues to pump across the peg, the scBTC price will rise.  as the SC attracts more conversion of BTC to scBTC, the price will rise even more.  as miners and nodes switch to the SC, price should rise even more. at some point the price of BTC will drop below that of scBTC b/c the MC will become the MM'd one and therefore less secure.  the last ones out of the MC may get blocked by 51% attacks or their SPV proof fees might rise to very high levels.

in the scenario where the innovation is invalid and the MC is destined to stay the MC, he could just create a pump and dump of scBTC.

i'm perfectly aware of that.

my baseline case includes those assumptions mainly b/c i think that will be the most common variety of SC created.

but that doesn't invalidate what i've outlined to be an expected speculative attack.

 

that is not an incentive to create a speculative attack. basically you just reiterated your mass exodus scenario but you didn't prove why someone would want to precipitate this exodus and how it would benefit them (other than the obvious "don't be left holding the bag")

@cypherdoc

There is possible to build endless variation of SC's.

Let's talk about small group of them
 - Symmetric two-way peg
 - with conversion rate 1:1

a) We can verify they are Symmetric two-way peg b/c anybody can send anytime BTC to scBTC and back with conversion rate 1:1.
b) if (a) is not possible then this SC is not "Symmetric two-way peg with conversion rate 1:1"

if you accept the scenario as i've outlined it, i think there would be an incentive to 51% attack the Bitcoin MC to block as many BTC from entering the SC as possible to decrease the eventual supply of scBTC and therefore increase its price.  

again, it's more complicated than a simple upgrade b/c an upgrade just involves downloading an updated client.  my scenario requires a wholesale movement of all BTC to scBTC which exposes them to loss by hacking and identity exposure.

I consider that statement to be Marketing. As such, I'm not sure it is possible for a Marketing statement to have an exploit.

BTC can only exist on the Bitcoin chain. scBTC is an alt that is backed by BTC.

If scBTC defeats BTC it means an alt has defeated BTC. I don't have a problem with that, but some do, of course.

I'm pretty sure the mining fee would be negligible unless you are like the last one out because you can always do the exchanges in very large quantity. Given that there is no reason for BTC to be priced (significantly) lower so that is a negligible factor.

I fail to see how this is anything but an upgrade. An economic majority of bitcoin (meaning miners, nodes, and users all) could decide right now to change anything they want about BTC and if you don't like it, too bad.

if you stay behind your risk goes up b/c now the MC is the MM'd chain, say at only 40% of the SC hashrate.  less security and chance for 51% attacks to block your SPV proof attempting to get out of BTC into scBTC.  plus, the mining fee to construct the proof has to go up b/c they will be paid in BTC which is priced lower in fiat terms.

I posted this just now https://bitcointalksearch.org/topic/m.9374056.  Is my logic sound?

"the core observation is that “Bitcoin” the blockchain is conceptually independent from “bitcoin” the asset: if we had technology
to support the movement of assets between blockchains, new systems could be developed which
users could adopt by simply reusing the existing bitcoin currency"

http://www.blockstream.com/sidechains.pdf

the basic problem is right here.  separating the BTC from its blockchain will allow exploits.

I still don't see how you lose value as long as the right to exchange is maintained, and the main chain survives at all. You can always exchange your BTC for scBTC later.

Perhaps you lose the opportunity cost of buying at a premium instead of making an exchange, but that should be fairly small (value of buying on an exchange instead of waiting days for an cross-chain exchange).

sure.

remember, the scBTC will start out below the BTC when first introduced.  who knows, it could be close to zero, or may quickly elevate just below the BTC price.  then the speculator launches the attack by pumping BTC thru the peg. at the same time, he embarks on a forum blitz saying how great the SC is and how it will take over.  since these scBTC will be traded on an open exchange, the market will view a rising #scBTC and a rising price on the SC as validation of the innovation, just like you did when questioned.  if i saw that happening, i'd move a large chunk of my BTC into scBTC immediately b/c i also know there's a risk free put in place.  especially if the SC has been functioning bug free for a number of months.  as more and more ppl make the same conclusion, the scBTC will rise even more dragging up the BTC price as arbitration sets in.  but astute investors will see that the scBTC is leading the BTC price or at least rising faster.  this would indicate that the SC may take over.  as that happens, cold wallet hodlers are placed into a bind.  either follow or risk losing value as i think miners will also make the switch to the SC b/c their fees and block rewards paid in scBTC are higher.  once enough of this happens in a mass transition, i think it's logical to believe the Bitcoin will become the MM'd chain and the SC the MC.  this will occur if the added innovation is valid, say like perfect anonymity.

so the incentive is to move first or risk losing value by having the MC become obsoleted.

the problem is even worse when you have an innovation that is controversial; like faster confirmation times.  a speculator will pump the price until others follow, and then dump, whipsawing everybody.

You have asymmetric information, just like any pump-and-dump scam. Other people think that the growth in value is organic and reflects growing demand, while you know that you have actually rigged the market by cornering 90% of the scBTC, and that support is in the process of going away as you (secretly) cash out.

I guess that is arbitrage (in your favor), in a sense.

Explain? You're not the only one who's gonna want to dump so of that premium priced scBTC for more Bitcoins

Oil too.

What is up? Just USD?

Meanwhile, Gold collapsing,  bitcoin (also collapsing)

There is no arbitrage.


Yes that was the point. It is a tool for feeding speculative demand and creating volatility.


Because there would be actual BTC locked to the sidechain.

Here is my evil plan for pump and dump riches:

1. Quietly create a sidechain with 1:1 conversion and a cap of 100k bitcoins.

2. Borrow 90k BTC

3. Lock 90k BTC in order to release 90k scBTC

4. Add a few features, spend some money on marketing and promote the sidechain as being "hot". ("Look how much has already been locked!")

5. Wait for the cap to be reached and speculators to continue buying at a premium.

6. Sell some or all of my 90k scBTC to the speculators for >90k BTC

7. Repay the loan.

8. Lambo


Failure scenario:

1. Quietly create a sidechain with 1:1 conversion and a cap of 100k bitcoins.

2. Borrow 90k BTC

3. Lock 90k BTC in order to release 90k scBTC

4. Add a few features, spend some money on marketing and promote the sidechain as being "hot". ("Look how much has already been locked!")

5. Speculators laugh at me and ignore, because DOGE is being pumped.

6. Burn/lock my 90k scBTC to unlock 90k BTC

7. Repay loan.

8. Try again

I agree, but I am honestly still having trouble wrapping my head about how BTC would react if the value of such a capped scBTC would go up because of increased scarcity of available unit on the sidechain. From my point of view arbitrage would likely balance both units price.

So, yes, it might indeed create volatility but this is effectively a pump and dump scheme and just another case of buyers beware and due dilligence. Also, I'm not sure how the developer can "lock" 90% of the cap and make it appear as if these are actual BTCs locked onto this sidechain. My understanding is someone could determinate if the cap is indeed "almost reached" by investigating the blockchain.

I'm pretty sure that in anything approximating the current cryptocurrency population, demand for speculation greatly exceeds demand for "utility." Long term you may be right, but not now (and not for a while) in my opinion.


As I already explained a sidechain with a cap is strictly more attractive than a sidechain without a cap, all else being equal, if the cap has not been reached. So if someone clones the sidechain without a cap, someone else will clone the sidechain with a cap, and the latter will outcompete the former.

The question then is whether, in a group of undifferentiated sidechains with individual caps, users will spread out between them (making the caps irrelevant) or decide to pick one winner. I think one winner will be picked, not only for speculative reasons (which presently dominate, as I opined above), but for network effects as well. Users on different sidechains can't directly transact.

take a look at the VIX graph i just posted today.

whether the volatility causes the market to go down or it's the market going down that causes volatility, we don't know.  we do know that when volatility is going up, someone is losing money.