Great post as usual, ZB. I mostly1 agree: the amount of bitcoins that move to a sidechain will depend, in part, on the credibility of the 2-way peg. And, realistically, it will probably take years for any sidechain to establish enough credibility to attract a significant amount of bitcoins (assuming OP_SIDECHAINPROOFVERIFY is implemented, and even this could take a few years if it happens at all). So I suspect any migration of economic activity away from the Blockchain to be slow and anti-climactic.
Hypothetical Question: If we assume (perhaps unrealistically) that the 2-way peg is unbreakable and if we also assume (again, perhaps unrealistically) that the security of Bitcoin's blockchain remains unchanged with sidechains, what additional risks do sidechains impose? The risks I can see are (a) that sidechains could be used as an "excuse" to avoid addressing Bitcoin's scalability, thereby making the likelihood of an uber sidechain absorbing all the bitcoin more likely (along with the possible shenanigans that such an event might entail), and (b) that it sets a precedent that soft-forking changes to add new "features" are OK.
1I think even if one assumes the 2-way peg is unbreakable, that value is still stored on the sidechain ledger (at least) in the extreme case where the majority of coins and economic activity take place on that sidechain. If everyone moves out of bitcoin and onto the sidechain, then the Blockchain no longer serves its memory function--it becomes superseded by the sidechain's ledger.
Thanks for this, Peter. It brings me to something I've been thinking about recently: is the ledger we talk about really "with Bitcoin" (the main chain) in the first place? Or, in what sense is the ledger with Bitcoin or with a sidechain (or with a spin-off)?
If everyone moves out of bitcoin and onto the sidechain, then the Blockchain no longer serves its memory function--it becomes superseded by the sidechain's ledger.
It seems to me that, assuming the 2wp is perfect and permanent, if everyone moves to the sidechain, the ledger remains perfectly preserved as long as the sidechain continues working. Bitcoin is no longer serving the memory function (
Bitcoin the protocol/chain is dead), but the memory function is being served by another chain (and
Bitcoin the ledger lives on). The store of value function has been maintained, but not by what we'd usually want to call "Bitcoin."
There are some definitional ambiguities making this difficult to pin down. The word Bitcoin is used to mean:
- Bitcoin the protocol
- Bitcoin the protocol maintained by the people now known as the core devs
- Bitcoin the protocol adopted by the economic majority, or the majority of mining power
- Bitcoin the blockchain
- Bitcoin the ecosystem
- Bitcoin the ledger (who owns what percentage of the ledger)
The most notable thing about this list, I think, is that the first meanings are the most commonly used, but the last meanings are what really matter from an investor's perspective. Especially Bitcoin the ledger. A sidechain takeover threatens the protocol and the blockchain, but not necessarily the ecosystem, and not the ledger insofar as the peg is ensured and the sidechain is as sound as Bitcoin.
Now whether the sidechain will be as sound as Bitcoin is up in the air. I am skeptical for now, but again in a scenario where
everyone is moving to the sidechain that condition has presumably been met in a most credible fashion.
To me, spin-offs are a safer and more elegant way to add functionality to Bitcoin the ledger. Perhaps if Bitcoin the ledger was recognized as the real essence of Bitcoin, rather than the protocol used for updating that ledger, spin-offs would be recognized by everyone as the obvious choice. What do you think?