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From: Erik Aronesty <erik@q32.com>
Date: Thu, 22 Jun 2017 09:45:33 -0400
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Subject: Re: [bitcoin-dev] Drivechain RfD -- Follow Up
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Users would tolerate depreciation because the intention is to have a cheap
way of transacting using a two-way pegged chain that isn't controlled by
miners.   Who cares about some minor depreciation when the purpose of the
chain is to do cheap secure transactions forever?

Add in UTXO commitments and you've got a system that is cheap and
secure-enough for transfer. storage and accumulation of a ledger... before
moving in to the main chain.

Seems better to me than messing with the main chain's incentive structure
via merged mining.


On Thu, Jun 22, 2017 at 9:27 AM, Paul Sztorc <truthcoin@gmail.com> wrote:

> Hi Erik,
>
> I don't think that your design is competitive. Why would users tolerate a
> depreciation of X% per year, when there are alternatives which do not
> require such depreciation? It seems to me that none would.
>
> Paul
>
> On 6/20/2017 9:38 AM, Erik Aronesty wrote:
>
> - a proof-of-burn sidechain is the ultimate two-way peg.   you have to
> burn bitcoin *or* side-chain tokens to mine the side chain.   the size of
> the burn is the degree of security.    i actually wrote code to do
> randomized blind burns where you have a poisson distribution
> (non-deterministic selected burn).    there is no way to game it... it's
> very similar to algorand - but it uses burns instead of staking
>
> - you can then have a secure sidechain that issues a mining reward in
> sidechain tokens, which can be aggrregated and redeemed for bitcoins.   the
> result of this is that any bitcoins held in the sidechain depreciate in
> value at a rate of X% per year.   this deflation rate pays for increased
> security
>
> - logically this functions like an alt coin, with high inflation and cheap
> transactions.   but the altcoin is pegged to bitcoin's price because of the
> pool of unredeemed bitcoins held within the side chain.
>
>
>
> On Tue, Jun 20, 2017 at 7:54 AM, Paul Sztorc <truthcoin@gmail.com> wrote:
>
>> Hi Erik,
>>
>> As you know:
>>
>> 1. If a sidechain is merged mined it basically grows out of the existing
>> Bitcoin mining network. If it has a different PoW algorithm it is a new
>> mining network.
>> 2. The security (ie, hashrate) of any mining network would be determined
>> by the total economic value of the block. In Bitcoin this is
>> (subsidy+tx_fees)*price, but since a sidechain cannot issue new tokens it
>> would only be (tx_fees)*price.
>>
>> Unfortunately the two have a nasty correlation which can lead to a
>> disastrous self-fulfilling prophecy: users will avoid a network that is too
>> insecure; and if users avoid using a network, they will stop paying txn
>> fees and so the quantity (tx_fees)*price falls toward zero, erasing the
>> network's security. So it is quite problematic and I recommend just biting
>> the bullet and going with merged mining instead.
>>
>> And, the point may be moot. Bitcoin miners may decide that, given their
>> expertise in seeking out cheap sources of power/cooling, they might as well
>> mine both/all chains. So your suggestion may not achieve your desired
>> result (and would, meanwhile, consume more of the economy's resources --
>> some of these would not contribute even to a higher hashrate).
>>
>> Paul
>>
>>
>>
>>
>> On 6/19/2017 1:11 PM, Erik Aronesty wrote:
>>
>> It would be nice to be able to enforce that a drivechain *not* have the
>> same POW as bitcoin.
>>
>> I suspect this is the only way to be sure that a drivechain doesn't
>> destabilize the main chain and push more power to miners that already have
>> too much power.
>>
>>
>>
>>
>
>

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Content-Type: text/html; charset="UTF-8"
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<div dir=3D"ltr"><div>Users would tolerate depreciation because the intenti=
on is to have a cheap way of transacting using a two-way pegged chain that =
isn&#39;t controlled by miners.=C2=A0=C2=A0 Who cares about some minor depr=
eciation when the purpose of the chain is to do cheap secure transactions f=
orever?=C2=A0=C2=A0=C2=A0 <br><br>Add in UTXO commitments and you&#39;ve go=
t a system that is cheap and secure-enough for transfer. storage and accumu=
lation of a ledger... before moving in to the main chain.=C2=A0=C2=A0 <br><=
br></div><div>Seems better to me than messing with the main chain&#39;s inc=
entive structure via merged mining.<br></div><div><br></div></div><div clas=
s=3D"gmail_extra"><br><div class=3D"gmail_quote">On Thu, Jun 22, 2017 at 9:=
27 AM, Paul Sztorc <span dir=3D"ltr">&lt;<a href=3D"mailto:truthcoin@gmail.=
com" target=3D"_blank">truthcoin@gmail.com</a>&gt;</span> wrote:<br><blockq=
uote class=3D"gmail_quote" style=3D"margin:0 0 0 .8ex;border-left:1px #ccc =
solid;padding-left:1ex">
 =20
   =20
 =20
  <div text=3D"#000000" bgcolor=3D"#FFFFFF">
    <div class=3D"m_3722835584705217683moz-cite-prefix">Hi Erik,<br>
      <br>
      I don&#39;t think that your design is competitive. Why would users
      tolerate a depreciation of X% per year, when there are
      alternatives which do not require such depreciation? It seems to
      me that none would.<span class=3D"HOEnZb"><font color=3D"#888888"><br=
>
      <br>
      Paul</font></span><span class=3D""><br>
      <br>
      On 6/20/2017 9:38 AM, Erik Aronesty wrote:<br>
    </span></div><span class=3D"">
    <blockquote type=3D"cite">
      <div dir=3D"ltr">
        <div>- a proof-of-burn sidechain is the ultimate two-way peg. =C2=
=A0
          you have to burn bitcoin *or* side-chain tokens to mine the
          side chain. =C2=A0 the size of the burn is the degree of security=
.
          =C2=A0 =C2=A0i actually wrote code to do randomized blind burns w=
here
          you have a poisson distribution (non-deterministic selected
          burn). =C2=A0 =C2=A0there is no way to game it... it&#39;s very s=
imilar to
          algorand - but it uses burns instead of staking<br>
        </div>
        <div><br>
        </div>
        <div>- you can then have a secure sidechain that issues a mining
          reward in sidechain tokens, which can be aggrregated and
          redeemed for bitcoins. =C2=A0 the result of this is that any
          bitcoins held in the sidechain depreciate in value at a rate
          of X% per year. =C2=A0 this deflation rate pays for increased
          security</div>
        <div><br>
        </div>
        <div>- logically this functions like an alt coin, with high
          inflation and cheap transactions. =C2=A0 but the altcoin is pegge=
d
          to bitcoin&#39;s price because of the pool of unredeemed bitcoins
          held within the side chain.</div>
        <div><br>
          <br>
        </div>
      </div>
      <div class=3D"gmail_extra"><br>
        <div class=3D"gmail_quote">On Tue, Jun 20, 2017 at 7:54 AM, Paul
          Sztorc <span dir=3D"ltr">&lt;<a href=3D"mailto:truthcoin@gmail.co=
m" target=3D"_blank">truthcoin@gmail.com</a>&gt;</span>
          wrote:<br>
          <blockquote class=3D"gmail_quote" style=3D"margin:0 0 0 .8ex;bord=
er-left:1px #ccc solid;padding-left:1ex">
            <div text=3D"#000000" bgcolor=3D"#FFFFFF">
              <div class=3D"m_3722835584705217683m_-7917178296017049299moz-=
cite-prefix">Hi
                Erik,<br>
                <br>
                As you know:<br>
                <br>
                1. If a sidechain is merged mined it basically grows out
                of the existing Bitcoin mining network. If it has a
                different PoW algorithm it is a new mining network.<br>
                2. The security (ie, hashrate) of any mining network
                would be determined by the total economic value of the
                block. In Bitcoin this is (subsidy+tx_fees)*price, but
                since a sidechain cannot issue new tokens it would only
                be (tx_fees)*price.<br>
                <br>
                Unfortunately the two have a nasty correlation which can
                lead to a disastrous self-fulfilling prophecy: users
                will avoid a network that is too insecure; and if users
                avoid using a network, they will stop paying txn fees
                and so the quantity (tx_fees)*price falls toward zero,
                erasing the network&#39;s security. So it is quite
                problematic and I recommend just biting the bullet and
                going with merged mining instead.<br>
                <br>
                And, the point may be moot. Bitcoin miners may decide
                that, given their expertise in seeking out cheap sources
                of power/cooling, they might as well mine both/all
                chains. So your suggestion may not achieve your desired
                result (and would, meanwhile, consume more of the
                economy&#39;s resources -- some of these would not
                contribute even to a higher hashrate).<span class=3D"m_3722=
835584705217683HOEnZb"><font color=3D"#888888"><br>
                    <br>
                    Paul</font></span>
                <div>
                  <div class=3D"m_3722835584705217683h5"><br>
                    <br>
                    <br>
                    <br>
                    On 6/19/2017 1:11 PM, Erik Aronesty wrote:<br>
                  </div>
                </div>
              </div>
              <div>
                <div class=3D"m_3722835584705217683h5">
                  <blockquote type=3D"cite">
                    <div dir=3D"ltr">
                      <div>It would be nice to be able to enforce that a
                        drivechain *not* have the same POW as bitcoin. <br>
                        <br>
                      </div>
                      <div>I suspect this is the only way to be sure
                        that a drivechain doesn&#39;t destabilize the main
                        chain and push more power to miners that already
                        have too much power.<br>
                      </div>
                      <br>
                    </div>
                    <div class=3D"gmail_extra"><br>
                    </div>
                  </blockquote>
                  <p><br>
                  </p>
                </div>
              </div>
            </div>
          </blockquote>
        </div>
        <br>
      </div>
    </blockquote>
    <p><br>
    </p>
  </span></div>

</blockquote></div><br></div>

--001a113ad022ec7bb505528cb26b--