Lightning doesn’t create coins out of thin air
Of course, because millisatoshis not divisible by 1000 are enforced on-chain, right?
There’s no peg to be broken here. It’s just a trust minimised way to transfer Bitcoin off-chain and hasn’t much to do with a consensus mechanism, it’s not even a chain. A huge difference.
I can say the same about my idea, just cut this "it’s not even a chain" part, and you can copy-paste it 1:1 into my proposal.
Now there’s a problem, Bitcoin is fixed supply, so you can’t just create new coins as a staking reward out of thin air on the side chain, without breaking the exchange rate, because then the side chain has more Bitcoin in circulation, than can be redeemed or actually were put in.
I don't need any new coins. Each validator can take fees, in the same way as LN nodes take fees.
If you don’t create coins to reward staking, then if the transaction fees are higher on the side chain, why wouldn’t people just use the main chain again?
They always can. There is no way to stop them, they can put their coins in and out as they will, it is just a matter of signing some transaction.
Then miners get less fees on the PoS chain again, because people are disincentivized to even use it. So what problem was fixed in the first place?
The problem of creating new features without any forks, of course. People have a lot of ideas, and create a lot of altcoins to reach them. There is no reason to create any new coins out of thin air, if they could sign their bitcoins instead.
The only thing the PoS does in this case is moving the relative wealth to the top holders, meaning they can redeem more Bitcoin over time, while everyone else can less.
And people accept that by signing their own coins. They accept to gain and lose coins, by signing messages, and there is no way to stop anyone from signing any message they want. That's the best part of this "unstoppability", that there are some ideas, where even Proof of Work enthusiasts cannot destroy easily. That's why if you try to stop my proposal, you may hurt Lightning Network at the same time. Then, you have to choose wisely, to not kill too many networks with one shot.
How isn’t this vastly different from Lightning.
I still cannot see any difference. Each Lightning participant decide, how to make a closing transaction. The same with sidechains, the act of moving coins on-chain simply means, that everyone agreed to destroy sidechain coins, and take them on the mainchain.
And then there’s still the question how will they do it better than lightning?
Simple, in LN you cannot transact with all participants directly, in sidechains you can. If you are completely new, with fresh keys, you cannot be introduced into LN, without touching on-chain coins. In sidechains, it is possible.