Quote from: go1111111 on November 04, 2014, 03:53:15 AM

Quote from: Taek on November 03, 2014, 05:47:37 PM

If permanent inflation ends up being required to encourage large amounts of hashing power, the heavy hitters will switch to a chain that has permanent inflation built in. If % fees on transactions end up being the most attractive choice, then the heavy hitters will switch to the chain that has % fees, because though they may not like the fee, they value the security and the heavy hitters will care enough to stomach the fees. If a really restrictive block size ends up being the correct choice... and so on. Sidechains could let all of these experiments happen on the Bitcoin currency directly.

Unfortunately, sidechains could probably not be used to switch to a cryptocurrency (ccy) with permanent inflation. The reason is that if a new ccy had permanent inflation, no holder of of that ccy could escape it, and everyone would be forced to pay for network security in proportion to their holdings. If you create a Bitcoin sidechain with permanent inflation, everyone has a choice as to whether to move their coins to that sidechain. So the only people paying for network security will be the people who choose to do so. You still have a free rider problem.

I saw "probably" above because there might be some clever solution where you'd make it extremely costly and difficult to move one's coins back from the sidechain to Bitcoin which somehow encourages everyone to just move their coins there and keep them there, or you might be able to come up with some crazy rules on the sidechain that I haven't thought of. But as far as I know, no one has proposed a viable way that sidechains could be used to solve the future network security problem.

The sidechain is still a completely different blockchain, which means that the security extended to the holders of the coins on the sidechain does not need to apply to the coins on the Bitcoin main chain. Even if you use merge mining, there is still more security in being on the chain that is the primary financial backer of the mining - IE Bitcoin is substantially safer from a 51% than Namecoin, even though Namecoin technically has ~50% of the hashrate of Bitcoin. The amount of financial loss a miner will accept when switching away from Namecoin, or mining a specific fork of Namecoin, is much less than if the miner were to do the same to Bitcoin. Tactics like bribery could be much more effective in attacking Namecoin because most Namecoin miners mostly only care about the Bitcoin chain. They aren't invested in the long term health of Namecoin. Similarly, if in the distant future some sidechain has 10x the funds going into mining than the Bitcoin mainchain, paranoid entities are likely to strongly prefer holding their funds in that chain, even at the cost of some dilution to their holdings (as long as the dilution is minimal enough - obviously there's a gradient).