Theoretically, a side-chain can be created to do the same things as Counterparty, Mastercoin, or any true altcoin. However, I wonder at the financial incentive to create an altcoin or XCP as a side-chain. Since the side-chain "currency" (not a true coin) will have to be created by burning/suspending/reserving BTC, and the second peg will unburn/unsuspend/redeem at most the same total amount of BTC, isn't the total value of the side-chain "currency" forever limited by the amount of BTC that was reserved for creation?

Let's say someone develops a really cool side-chain currency that does wonderful things, and everyone is using it and wants it. How is the value of any unit of that currency going to increase if it can only ever be redeemed for the same amount of BTC that was reserved to create it? I don't see how it's possible for the side-chain currency to have its own ecosystem and be, in a sense, detached from the original BTC reserve amount. (But I didn't major in math or economics, so maybe I'm missing something.)

Please see some of the questions posed by taariqlewis in this reddit thread for more: http://www.reddit.com/r/Bitcoin/comments/22p0ch/eli5_side_chains/