Gold collapsing. Bitcoin UP. - page 817.

brg444

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Quote from: cypherdoc on October 29, 2014, 02:48:39 PM

i agree. focus on my scenario.

Quote from: brg444 on October 29, 2014, 02:38:54 PM

I guess this is a possible scenario but I find it highly unlikely and a fail to see exactly how the whale profits from such attack? Can you explain further? The way I see it, yes the last out the door may lose but the first in do not gain anything other than securing is stake on the new chain?

I also think the growth of BTC's market cap will eventually mitigate such an attack as what you are suggesting assumes the "attacker" a considerable % stake of the BTC market

I'd like if you could develop your idea more regarding the first part of my comment.

brg444

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Quote from: smooth on October 29, 2014, 02:48:36 PM

Quote from: brg444 on October 29, 2014, 02:41:42 PM

Would any sensible person put their BTC in such a capped sidechain?

Why not? There is no risk (beyond the normal risk of side chain security) to doing so before the cap is reached. After the cap is reached you have the possibility of upside with downside protection. I can very much see how that might be attractive to some people.

In fact, if the cap has not been reached and you have a choice between a capped and uncapped sidechain with equivalent features, why would you not choose the capped one? You have greater upside with equivalent downside.

A cap would effectively prohibit users from participating in that sidechain without having to pay a premium (I think this is what you are suggesting). My opinion is someone would simply clone the sidechain and remove the cap.

I think the difference is you are proposing a speculative sidechain which can only acquire so many users vs. a utility sidechain. The utility sidechain with no cap is expected to win over the speculative sidechain that would try to attract user with the same feature.

cypherdoc

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Quote from: smooth on October 29, 2014, 02:39:08 PM

Quote from: cypherdoc on October 29, 2014, 02:31:32 PM

if BTC holders and miners can be seduced to switch to the SC, full nodes might be expected to as well.

That is called an upgrade. The same thing happens today if you convince miners, nodes, and users to adopt a new version of the software. It has nothing to do with sidechains, except perhaps providing a more gradual method to migrate.

it's also different from an upgrade b/c in that scenario, ppl don't have to crack open cold wallets. they just download software.

what i'm describing is a market exploitation/transition that will cause huge volatility. ppl lose money when there's volatility.

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Quote from: brg444 on October 29, 2014, 02:41:42 PM

Quote from: smooth on October 29, 2014, 02:35:44 PM

Quote from: Odalv on October 29, 2014, 02:24:39 PM

- I cannot imagine how somebody can pump scBTC when exchanging them against BTC is 1:1 at the protocol level.

One example was specifically described: A nominally 1:1 side chain with a cap on the amount of BTC that can be moved to the side chain. Now imagine that the developer secretly grabs 90% of the cap before pumping the sidechain. The developer has a put that makes this a largely risk free (with my caveat about security risks).

I imagine that once speculators and scammers get to work on coming up with their own variations there will be more such methods developed. Scammers are innovative when it comes to methods of scamming if nothing else.

Would any sensible person put their BTC in such a capped sidechain? I don't see it. I'm also not sure how the developer could "secretly" grab 90% of the cap before pumping the sidechain. If 90% of the cap is held then I don't see any feasible way that you could create such a pump that would incite a BTC exodus. The numbers don't work.

i agree. focus on my scenario.

smooth

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Quote from: brg444 on October 29, 2014, 02:41:42 PM

Would any sensible person put their BTC in such a capped sidechain?

Why not? There is no risk (beyond the normal risk of side chain security) to doing so before the cap is reached. After the cap is reached you have the possibility of upside with downside protection. I can very much see how that might be attractive to some people.

In fact, if the cap has not been reached and you have a choice between a capped and uncapped sidechain with equivalent features, why would you not choose the capped one? You have greater upside with equivalent downside.

Quote

I don't see it. I'm also not sure how the developer could "secretly" grab 90% of the cap before pumping the sidechain.

Why not? Create the side chain, don't publicize it that much. Quietly lock 90% of the cap. Then add a few features and begin to publicize. Greed ("the cap has almost been reached, this baby is ready to fly") and no risk to the developer anyway does the rest.

Quote

If 90% of the cap is held then I don't see any feasible way that you could create such a pump that would incite a BTC exodus. The numbers don't work.

I wasn't suggesting a BTC exodus, that was another scenario entirely, although it does potentially allow for a "value exodus" (BTC goes down while scBTC goes up). This is a method to create more speculative assets that could add to volatility to the overall economy. Whether that is a good thing or a bad thing is a matter of opinion.

cypherdoc

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Quote from: smooth on October 29, 2014, 02:39:08 PM

Quote from: cypherdoc on October 29, 2014, 02:31:32 PM

if BTC holders and miners can be seduced to switch to the SC, full nodes might be expected to as well.

That is called an upgrade. The same thing happens today if you convince miners, nodes, and users to adopt a new version of the software. It has nothing to do with sidechains, except perhaps providing a more gradual method to migrate.

no, no. read my first post about this above.

initially, scBTC can be expected to trade below BTC, as it is new and MM'd. as brg444 concluded from my questioning days ago, if observers see a large #scBTC appearing on the SC a price rise will likely follow as it indicates there might be merit to the innovation. if other speculators start to smell an opportunity of the SC becoming the MC, they will follow in a self feeding cycle. BTC hodlers then have a problem; either they follow or not. if not, i say they risk losing value b/c there comes a tipping point where arbitrage won't keep the relative prices close together. who knows where that point is in the transition; 30, 40, 50%? but at some point, in the case where we have a truly innovative SC, miners will primarily mine the SC and start MM the MC. then, the MC becomes less secure and in danger of a 51% attack. that's where BTC become priced below scBTC. and that's where you'll get a run/stampede of BTC to scBTC.

tvbcof

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Quote from: cypherdoc on October 29, 2014, 12:56:30 PM

you touched on something i'm very worried with SC's the other day: a speculative attack.
...

Ya, I like to focus on real problems. Any non-trivial system will have some of these, though I had to dig surprisingly deeply to find some with sidechains. It's frusterating to me that 99% of the loudly proposed 'problems' with sidechains driven by simplistic misunderstandings, and more often than not by people playing off these.

By identifying real problems at this phase they can be considered in some of the foundational designs of sidechain implementations.

brg444

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Quote from: smooth on October 29, 2014, 02:35:44 PM

Quote from: Odalv on October 29, 2014, 02:24:39 PM

- I cannot imagine how somebody can pump scBTC when exchanging them against BTC is 1:1 at the protocol level.

One example was specifically described: A nominally 1:1 side chain with a cap on the amount of BTC that can be moved to the side chain. Now imagine that the developer secretly grabs 90% of the cap before pumping the sidechain. The developer has a put that makes this a largely risk free (with my caveat about security risks).

I imagine that once speculators and scammers get to work on coming up with their own variations there will be more such methods developed. Scammers are innovative when it comes to methods of scamming if nothing else.

Would any sensible person put their BTC in such a capped sidechain? I don't see it. I'm also not sure how the developer could "secretly" grab 90% of the cap before pumping the sidechain. If 90% of the cap is held then I don't see any feasible way that you could create such a pump that would incite a BTC exodus. The numbers don't work.

cypherdoc

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Quote from: smooth on October 29, 2014, 02:35:44 PM

Quote from: Odalv on October 29, 2014, 02:24:39 PM

- I cannot imagine how somebody can pump scBTC when exchanging them against BTC is 1:1 at the protocol level.

One example was specifically described: A nominally 1:1 side chain with a cap on the amount of BTC that can be moved to the side chain. Now imagine that the developer secretly grabs 90% of the cap before pumping the sidechain. The developer has a put that makes this a largely risk free (with my caveat about security risks).

I imagine that once speculators and scammers get to work on coming up with their own variations there will be more such methods developed. Scammers are innovative when it comes to methods of scamming if nothing else.

it's pretty clear that Sidescams are going to blossom. all they have to do is cause volatility to the Bitcoin ecosystem to have a negative effect.

but, i have just described to you a SC situation that starts out with good intent and how a whale could exploit that situation with a speculative attack all b/c he has the economic equivalent of a risk free put with the 2 way peg.

everyone knows the consequences of the Greenspan Put, do they not?

smooth

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Quote from: cypherdoc on October 29, 2014, 02:31:32 PM

if BTC holders and miners can be seduced to switch to the SC, full nodes might be expected to as well.

That is called an upgrade. The same thing happens today if you convince miners, nodes, and users to adopt a new version of the software. It has nothing to do with sidechains, except perhaps providing a more gradual method to migrate.

brg444

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Bitcoin replaces central, not commercial, banks

Quote from: cypherdoc on October 29, 2014, 02:31:32 PM

this is the follow on from me beating around the bush the other day, btw.

if BTC holders and miners can be seduced to switch to the SC, full nodes might be expected to as well.

I guess this is a possible scenario but I find it highly unlikely and a fail to see exactly how the whale profits from such attack? Can you explain further? The way I see it, yes the last out the door may lose but the first in do not gain anything other than securing is stake on the new chain?

I also think the growth of BTC's market cap will eventually mitigate such an attack as what you are suggesting assumes the "attacker" a considerable % stake of the BTC market

smooth

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Quote from: Odalv on October 29, 2014, 02:24:39 PM

- I cannot imagine how somebody can pump scBTC when exchanging them against BTC is 1:1 at the protocol level.

One example was specifically described: A nominally 1:1 side chain with a cap on the amount of BTC that can be moved to the side chain. Now imagine that the developer secretly grabs 90% of the cap before pumping the sidechain. The developer has a put that makes this a largely risk free (with my caveat about security risks).

I imagine that once speculators and scammers get to work on coming up with their own variations there will be more such methods developed. Scammers are innovative when it comes to methods of scamming if nothing else.

brg444

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Bitcoin replaces central, not commercial, banks

BTW, for those who haven't seen it yet, this new Coinbase feature is FANTASTIC : http://blog.coinbase.com/post/101266587127/introducing-multisig-vault-you-can-now-control-your

Terrific innovation and demonstration that technology can enable better consumer protection than mere regulations

cypherdoc

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Quote from: brg444 on October 29, 2014, 02:28:45 PM

Quote from: cypherdoc on October 29, 2014, 01:35:19 PM

Quote from: cypherdoc on October 29, 2014, 12:56:30 PM

you touched on something i'm very worried with SC's the other day: a speculative attack.

assuming a SC failure is a long tail unlikely event as from a bug, the 2 way peg and scBTC is acting like a "risk free put". therefore a whale could pump large amts of BTC thru the peg driving up the #scBTC and eventually its price with a reasonable confidence that he won't be hurt as he could always reverse back into BTC. the problem is other BTC holders might be forced to follow for fear of the SC taking over as the mainchain and the merge mining % flipping. in other words, MM for Namecoin is about 70% that of Bitcoin currently. assuming a SC is initially MM'd, say at 60%, if a superior SC can flip this around by making Bitcoin 60% MM'd with the SC becoming the main chain, those left behind in BTC will lose value or may lose everything. the problem is that BTC holders may not be able to differentiate an unfolding superior SC from that of a Sidescam.

i see a very high likelihood of this attack that at the very least will cause volatility in the entire ecosystem. and that would be bad for the BTC and the scBTC price.

i also don't think this can be arbed away. it's reasonable to think scBTC would start off lower than BTC from being new and less secured with MM. if the whale can force this to flip with the price of scBTC rising faster than BTC at the very least this will cause volatility. some BTC holders and especially the speculators may be convinced the SC has a chance to take over and will follow encouraged by the risk free put. miners may then switch to the SC too and start MM BTC instead. yes, arb in the middle of a big picture transition can keep prices relatively equal. but if a true transition is really happening to the SC becoming dominant, the BTC price should start to drop below that of scBTC as realization sets in that BTC is going to lose and BTC itself becomes the 60% MM'd chain with the SC as the mainchain.

so in essence, last out the door will lose.

Just a note about this scenario.

I don't believe miners switching over to the SC and MM BTC makes the SC the mainchain. Only a full exile of the nodes can do that.

this is the follow on from me beating around the bush the other day, btw.

if BTC holders and miners can be seduced to switch to the SC, full nodes might be expected to as well.

brg444

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Bitcoin replaces central, not commercial, banks

Quote from: cypherdoc on October 29, 2014, 01:35:19 PM

Quote from: cypherdoc on October 29, 2014, 12:56:30 PM

you touched on something i'm very worried with SC's the other day: a speculative attack.

assuming a SC failure is a long tail unlikely event as from a bug, the 2 way peg and scBTC is acting like a "risk free put". therefore a whale could pump large amts of BTC thru the peg driving up the #scBTC and eventually its price with a reasonable confidence that he won't be hurt as he could always reverse back into BTC. the problem is other BTC holders might be forced to follow for fear of the SC taking over as the mainchain and the merge mining % flipping. in other words, MM for Namecoin is about 70% that of Bitcoin currently. assuming a SC is initially MM'd, say at 60%, if a superior SC can flip this around by making Bitcoin 60% MM'd with the SC becoming the main chain, those left behind in BTC will lose value or may lose everything. the problem is that BTC holders may not be able to differentiate an unfolding superior SC from that of a Sidescam.

i see a very high likelihood of this attack that at the very least will cause volatility in the entire ecosystem. and that would be bad for the BTC and the scBTC price.

i also don't think this can be arbed away. it's reasonable to think scBTC would start off lower than BTC from being new and less secured with MM. if the whale can force this to flip with the price of scBTC rising faster than BTC at the very least this will cause volatility. some BTC holders and especially the speculators may be convinced the SC has a chance to take over and will follow encouraged by the risk free put. miners may then switch to the SC too and start MM BTC instead. yes, arb in the middle of a big picture transition can keep prices relatively equal. but if a true transition is really happening to the SC becoming dominant, the BTC price should start to drop below that of scBTC as realization sets in that BTC is going to lose and BTC itself becomes the 60% MM'd chain with the SC as the mainchain.

so in essence, last out the door will lose.

Just a note about this scenario.

I don't believe miners switching over to the SC and MM BTC makes the SC the mainchain. Only a full exile of the nodes can do that.

cypherdoc

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Quote from: Odalv on October 29, 2014, 02:24:39 PM

Quote from: cypherdoc on October 29, 2014, 02:14:50 PM

Quote from: smooth on October 29, 2014, 02:01:37 PM

Quote from: cypherdoc on October 29, 2014, 12:56:30 PM

assuming a SC failure is a long tail unlikely event as from a bug, the 2 way peg and scBTC is acting like a "risk free put".

I don't think it is risk free since a failure of the sidechain could prevent unlocking on the BTC side, or conceivably cause the locked BTC to run out.

i understand. but a chance of a bug in a well designed open sourced SC is probably no more than a bug in Bitcoin itself. especially if an attacker waits a good amount of time to prove stability of the SC before launching the speculative attack. given those circumstances, the 2 way peg IS a risk free put.

Quote

i see a very high likelihood of this attack that at the very least will cause volatility in the entire ecosystem. and that would be bad for the BTC and the scBTC price.

This seems very plausible to me.

a speculator loves to cause volatility and will love the risk free put nature of this situation. he will take advantage of it at the expense of less sophisticated investors.

- I cannot imagine how somebody can pump scBTC when exchanging them against BTC is 1:1 at the protocol level.

why not? we're talking about a whale pumping in a "large" #BTC thru the peg for scBTC. whether he is doing it b/c he truly believes the SC has merit or is doing it as a pump and dump, observers will never know.

Quote

- I cannot imagine how keeping BTC in MixerBTC, HotWalletBTC or ExchangeBTC make in more valuable (if you do not use them for trading, fast-spending or mixing)

take my base case scenario and add in perfect anonymity as the innovation. if this SC actually works, the paper itself said that BTC holders could make a transition to the SC to take advantage of the innovation.

the question is, do we all want to be making transitions to a new chain everytime an innovation comes along?

cypherdoc

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Quote from: smooth on October 29, 2014, 02:01:37 PM

Quote from: cypherdoc on October 29, 2014, 12:56:30 PM

assuming a SC failure is a long tail unlikely event as from a bug, the 2 way peg and scBTC is acting like a "risk free put".

I don't think it is risk free since a failure of the sidechain could prevent unlocking on the BTC side, or conceivably cause the locked BTC to run out.

Quote

i see a very high likelihood of this attack that at the very least will cause volatility in the entire ecosystem. and that would be bad for the BTC and the scBTC price.

This seems very plausible to me.

remember that my base case for consideration is a simple Bitcoin fork with no sidecoin with one sell-able "innovation" added in. in this sense, an outright failure is not to be expected.

Odalv

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Quote from: cypherdoc on October 29, 2014, 02:14:50 PM

Quote from: smooth on October 29, 2014, 02:01:37 PM

Quote from: cypherdoc on October 29, 2014, 12:56:30 PM

assuming a SC failure is a long tail unlikely event as from a bug, the 2 way peg and scBTC is acting like a "risk free put".

I don't think it is risk free since a failure of the sidechain could prevent unlocking on the BTC side, or conceivably cause the locked BTC to run out.

i understand. but a chance of a bug in a well designed open sourced SC is probably no more than a bug in Bitcoin itself. especially if an attacker waits a good amount of time to prove stability of the SC before launching the speculative attack. given those circumstances, the 2 way peg IS a risk free put.

Quote

i see a very high likelihood of this attack that at the very least will cause volatility in the entire ecosystem. and that would be bad for the BTC and the scBTC price.

This seems very plausible to me.

a speculator loves to cause volatility and will love the risk free put nature of this situation. he will take advantage of it at the expense of less sophisticated investors.

- I cannot imagine how somebody can pump scBTC when exchanging them against BTC is 1:1 at the protocol level.
- I cannot imagine how keeping BTC in MixerBTC, HotWalletBTC or ExchangeBTC make them more valuable (if you do not use them for trading, fast-spending or mixing)

cypherdoc

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Quote from: smooth on October 29, 2014, 02:01:37 PM

Quote from: cypherdoc on October 29, 2014, 12:56:30 PM

assuming a SC failure is a long tail unlikely event as from a bug, the 2 way peg and scBTC is acting like a "risk free put".

I don't think it is risk free since a failure of the sidechain could prevent unlocking on the BTC side, or conceivably cause the locked BTC to run out.

i understand. but a chance of a bug in a well designed open sourced SC is probably no more than a bug in Bitcoin itself. especially if an attacker waits a good amount of time to prove stability of the SC before launching the speculative attack. given those circumstances, the 2 way peg IS a risk free put.

Quote

i see a very high likelihood of this attack that at the very least will cause volatility in the entire ecosystem. and that would be bad for the BTC and the scBTC price.

This seems very plausible to me.

a speculator loves to cause volatility and will love the risk free put nature of this situation. he will take advantage of it at the expense of less sophisticated investors.

smooth

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Quote from: cypherdoc on October 29, 2014, 12:56:30 PM

assuming a SC failure is a long tail unlikely event as from a bug, the 2 way peg and scBTC is acting like a "risk free put".

I don't think it is risk free since a failure of the sidechain could prevent unlocking on the BTC side, or conceivably cause the locked BTC to run out.

Quote

i see a very high likelihood of this attack that at the very least will cause volatility in the entire ecosystem. and that would be bad for the BTC and the scBTC price.

This seems very plausible to me.

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