Quote from: notme on November 10, 2014, 11:45:41 PM

Quote from: sickpig on November 10, 2014, 11:32:24 PM

Quote from: NewLiberty on November 09, 2014, 09:54:30 PM

Quote from: brg444 on November 09, 2014, 09:28:27 PM

Quote from: NewLiberty on November 09, 2014, 08:19:34 PM

In this scheme, there will be only BTC buying with the fiat at exchanges. No BTC is sold to the market. Only scBTC is sold to the market but people believe the notion of the peg so they pay the same for them as they would for BTC (because after all they can be redeemed for BTC with only a 100 block delay in spend-ability).

Endgame is there are a lot of the scBTC created, reducing BTC liquidity and pumping the BTC fiat price... until it unwinds.

There is no peg.
There is no spoon.

Here is what I believe to be the flaw in your scenario :

If, as you say, people believe in the peg (which they absolutely should) then they will not buy your scBTC. In reality, the market has no incentive to purchase your scBTC over BTC if they are the same price.

The reason for this? Well you have suggested it yourself : the "block delay in spend-ability". What makes the best money? The most cost effective and versatile exchangeable asset. BTC is more easily exchangeable with fiat (because of liquidity) and other scBTCs than scBTC is and is also more cost-effective at doing so. No matter the 1:1 fiat peg, BTC is a more desirable unit than scBTC. BTC has better fungibility and liquidity in the economy than scBTC.

Here is where you are flatly wrong. There clearly is an incentive, the time incentive.
To change BTC to scBTC, you will have to wait for 100 blocks or so, whatever the confirmation time may be.
If you buy them at exchange, there is no wait.

This confirmation exchange value is created in both ways in the transaction. People will pay a premium for time, localbitcoin pricing is evidence enough of this.

Maybe I'm wrong but don't the atomic swaps described in the paper remove "the time incentive"?
Am I missing something obvious?

Atomic swaps don't involve BTC, they involve scBTC and an altcoin that also exists on the sidechain along with the scBTC.

My knowledge of all this new sidechains nomenclature is a little bit rusty at the least
(I have to go through the last few hundreds pages to get proper definitions).

But from what I read from the paper the atomic swaps will involve token exchange across
chains, I've quote the relevant part of the paper here:

Quote from: sidechains white paper

Appendix C Atomic swaps
Once a sidechain is operational, it is possible for users to exchange coins atomically between chains,
without using the peg. In fact, this is possible with altcoins today, though the independent prices
make it harder to organise. This is important, because as we have seen, direct use of the peg requires
fairly large transactions (with correspondingly large fees) and long wait periods. To contrast, atomic
swaps can be done using only two transactions on each network, each of size similar to ordinary
pay-to-address transactions

You're implying that atomic swaps apply only to scBTC and altcoin that belongs to the same chain, right?

I've gone through this thread and I find this post from Adam Back and it seems to confirm
that we can exchange coins across chains and, I dare to say, even BTC and scBTC.

Quote from: adam3us on November 01, 2014, 06:15:56 PM

Quote from: Kupsi on November 01, 2014, 05:20:06 PM

Since you are free to move coins between BTC and scBTC, the price will be the same. You don't sell scBTC for a lower price when you can transfer it back to BTC and sell it for the full price.

Correct. I think its worth clarifying that the peg is algorithmic, because its seems from the thread that some people may not understand that. You, personally, can ask the network automatically to swap unlimited quantities of BTC on the sidechain for BTC on the main bitcoin chain.

The only reason to swap with users using atomic swaps or trades is to do that faster. No one is going to take anything other than a negligible price difference because they can click a button and move the coins between chains themselves.

Further because that 2wp backstop is there, and anyone and his dog can do arbitrage, with full confidence that they'll be able to exercise the 2wp and capitalise on the small time-preference, the will be small. It seems just as likely that the sidechain coins sell at a small premium for the time-preference access to side-chain features. (Time-preference means someones preference to gain access to something sooner rather than waiting eg 24hrs, and they'll sometimes be willing to pay a small fee to get it earlier, eg check advances or such things).

I dont think it realistic that we would see anyone willing to sell sidechain BTC at anything significantly below par in either direction, to do so is to burn money needlessly. People will arbitrage it and its open to anyone to arbitrage. So unless someone wants to burn money (and bitcoin already supports proof of burn or pay to miners if you're into burning money or donating to miners), no one will be offering to swap sidechain BTC for BTC at anything far below or above $350 (assuming current market price of $350). eg $349.50 to $350.50 might be an example which is 15 basis points, that'd give someone a 15% return on an annual basis with steady arbitrage for a 2 day clearance time on the peg. They can maybe get a higher return (and hence be willing to offer even lower margins) by holding a float on both sides and cancelling some trades against others as those happen faster so they get more than one arbitrage fee per exercise of the 2wp.

Obviously no one is encouraging anyone to put real money into untested or buggy sidechains. I dont think there will be lots of sidechains and the main sidechains will be extremely well tested and coded to the same rigor as bitcoin itself.

Adam