rocks, I also disagree with your characterization of Mc plus SC's as one seamless ledger in which 21M coins float with sov. If that were the case, why all the fuss and need to firewall them off?
In theory they are buy no one knows for sure in reality.
And again you are simply stating an opinion as if it is fact but not responding to points made before.
The 2-way pegging process merge sidechains into the main chain as a single data structure. At any given time you could look at the bitcoin blockchain and billions of sidechains and see exactly where all 21M coins are in a completely open and transparent manner. That is the definition of a single seamless ledger that preserves the 21M cap and maintains the Sound Money aspect just as today.
It's fine to disagree, but so far you have not presented anything that counters that.
I think your actually wrong here from a technical standpoint.
From what I understand from odalv and gmax is that these SC's can be private communities which would be using scBTC and we would never know it. Certainly it seems like that way through the federated peg model. Remember these SC's are designed to fiction without having to have the Bitcoin network monitor them. The only thing that needs to be presented at the time of reentry into the Bitcoin network is a valid proof. In the meantime, maybe years, certainly the Bitcoin network has no idea what's going on with SC's and the scBTC involved so how would you?
Yes you may not be able to see what is happening off the main chain. (In the case of a zerocoin sidechain that would be the whole point BTW)
But my understanding is you would be able to see that the coins were moved to a sidechain and that is all you need for a global view. i.e. Bitcoin's main chain has 18M coins located at these UXTO, 1M coins on sidechain A, 1M coins on sidechain B, 1M coins on sidechain C. All 21M are accounted for.
The reason I'm saying that is a complete view is all 21M coins are accounted for visibly. The fact that you may not know what some of them are doing on sidechain B or who has them is not an issue, their existence and location on which chain is still known.
This might just be semantics....
That's a good point.
You seem to understand Economics. What's your opinion of we lose 50% of all BTC to a SC failure?
Not entirely sure, interesting question. It might have the same effect as if a shipment of gold from the US to Germany was sunk and permanently lost at the bottom of an ocean trench. It is a complete loss for those involved, but increases the value for the other 50% by removing supply from a fixed stock. Such an event wouldn't have stopped gold being used in 1880, it would have made people more careful with their gold.
So I think this event would make people be much more careful in using sidechains because sidechains introduce another layer of risk. Such an event might actually drive demand away from sidechains and onto the mainchain.
To me the main risk of sidechain ledgers is if a bad sidechain creator tried to artificially inflate the supply. Let's say someone created a centrally managed sidechain, received 1M BTC as 1M scBTC on that sidechain, but then artificially increased the supply of used scBTC on that sidechain to 10M scBTC over time. They could do this because this sidechain is not transparent in structure and no one would notice for a time.
This greatly damages the store of value property.
But only until the attempt was exposed. I think every attempt like this would fail, in the same manner as banks used to fail in runs. Some people would get concerned and transfer back to BTC. But the sidechain only has 1M BTC in reserve for 10M scBTC liabilities. Very quickly the 1M BTC would be exhausted or the convertibility window would close. Both actions would expose the fraud and the remaining 9M scBTC would quickly be priced to their true value (zero).
This is how fixed reserve assets function, they don't prevent fraud, they just force it to eventually come to public light. (The problem for fiat today is there is no forcing function).