I read the first half of the paper, and it seems to be broadly the concept I have mentioned in several posts. Basically, that Bitcoin become the central reserve, ie. the gold standard, and other altcoins running on sidechains are used for the actual transactions. This reduces the demands on the central chain, and allows communities or countries to manage their own payments. The "pegged" coins seem to be similar to the use of proof of stake rather than proof of work to validate transactions. This might help in the future as blocks become harder to mine.
One other adsvantage of this sidechain structure is to safeguard the main chain from government attack. Imagine that a government wants to disable Bitcoin. They can shut down an exchange, and seize all their coins. They could then flood the UTXO file with worthless comments, and this could leave most cash transfers un-verified and thus orphaned. If coins could be traded via sidechains, then delays on the main chain would become less important.
This is my opinion based on limited knowledge. I'd be interested in hearing comments about error in my theory.
Topic: Sidechain Questions (Read 588 times)
I read through the whitepaper by Blockstream regarding sidechains (found here: https://blockstream.com/sidechains.pdf),
and I'm wondering. So if you lock parent coins, say bitcoin, in a special transaction, then "transfer" them to a sidechain... say litecoin, does that magically create more litecoins in the litecoin chain, similar to how new litecoins are mined? I did not see that made explicit in the paper. The paper also mentions to bring them back to the parent chain, they also get locked into a special transaction. Doesn't that mean that, in my example, new litecoins would be created but not destroyed, thus forever increasing the litecoin supply? If that's not the case, how are the new litecoins (transferred and linked from bitcoins) introduced into the litecoin sidechain?
and I'm wondering. So if you lock parent coins, say bitcoin, in a special transaction, then "transfer" them to a sidechain... say litecoin, does that magically create more litecoins in the litecoin chain, similar to how new litecoins are mined? I did not see that made explicit in the paper. The paper also mentions to bring them back to the parent chain, they also get locked into a special transaction. Doesn't that mean that, in my example, new litecoins would be created but not destroyed, thus forever increasing the litecoin supply? If that's not the case, how are the new litecoins (transferred and linked from bitcoins) introduced into the litecoin sidechain?
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