T
toknormal
Guest
Sidechains ! 
Why can bitcoin not just implement masternodes in a sidechain ? Isn't Dash living on borrowed time ? Eventually, bitcoin will solve "instant payments" and every other conceivable archetype with recourse to sidechains/lightning network. Then you'd have feature-4 dealt with. You'd also have a load of technological gains.
This is a good question and one which the Dash community must be able to answer categorically.
Ostensibly, gold coins ("precious metal cash") are like side-chains to the gold supply in the sense that they are highly processed versions of the gold supply. Dollar bills and coins are like "side chains" to the electronic banks deposits in the sense that we can go to the cash terminal and "convert" some of our balance to a "notes and coins" side chain.
I say "ostensibly" because this is how it appears - both technologically and intuitively. But if we apply systems analysis to each case, a very different conclusion emerges with regards to how the archetype should be implemented as a synthetic asset.
First of all, gold coins are of course an on-chain phenomenon since they are no less gold metal than their "nugget" antecedents. Meanwhile, notes and coins are actually further up the food chain than bank deposits since notes are central bank money whereas bank deposits constitute derivative money.
A bitcoin sidechain works by locking up and "baking" a deposited bitcoin for a sufficient amount of time that a secondary network can cryptographically rely on it to back a different type of synthesised archetypal asset. So this would be like, say "locking up" your notes and coins in a bank deposit to gain an electronic version of their value that you can transmit across large distances. Except - it's the wrong way around. We are moving from cash to a derivative. And so it is with sidechains which is why they can never support feature 2 of the cash archetype.
By way of recourse to archetypal analysis therefore, we can determine that side chains potentially support the following monetary archetypes faithfully:
This may not seem all that important right now, but as cryptographic assets start to get whittled down to the core survivors it will be hugely important since the ability to port a divisible unit of the base asset and use in trade (as opposed to backing a monetary derivative) will categorically define the difference between a synthetic version of the cash archetype and a security (which is no different from what we have already had for centuries and does not need a blockchain).
An economic problem with sidechains
Lets look at sidechains from a completely different angle - macro economics. Maybe the designers thought about this already and gave them a politically motivated design priority and maybe they just didn't think about it at all. But one of the promoted technological "strengths" of sidechains (pegging) also has a crippling impact on bitcoin in economic terms.
If every other synthetic monetary asset is pegged to bitcoin, then their price cannot float freely in markets to reflect demand - only their liquidity (or "supply"). What this means is that deflationary/inflationary pressures are always transmitted to asset sectors in which they didn't originate.
For example, if the price of diamonds was always pegged to the price of gold, then a gold shortage would always result in an inflation of the diamond price - even if the market dynamics for diamonds was stable. "Mackerel coin" liquidity would likeways upset golf course attendances by transmitting deflation to "Golf Course Coin" sidechain by way of Bitcoin in the event of a fishing surplus and no market could be firewalled off from any other as thay are today in our multiple - currency world economy. (Venezuela is experiencing hyper inflation, but this is not immediatelly transmitted to the $USD or £GBP).
Sidechains and Monetary Properties
Finally, lets look at what sidechains do to the core, age-old recognised properties of money. In particular:
Again - you can't have it both ways. Either "Mackerel Coin" is backed by bitcoin (in which case it's a security, not cash) or it has independent characteristics which should be independently valued in markets (in which case it can't be a sidechain).
https://theblog.adobe.com/prototyping-difference-low-fidelity-high-fidelity-prototypes-use/
Why can bitcoin not just implement masternodes in a sidechain ? Isn't Dash living on borrowed time ? Eventually, bitcoin will solve "instant payments" and every other conceivable archetype with recourse to sidechains/lightning network. Then you'd have feature-4 dealt with. You'd also have a load of technological gains.
This is a good question and one which the Dash community must be able to answer categorically.
Ostensibly, gold coins ("precious metal cash") are like side-chains to the gold supply in the sense that they are highly processed versions of the gold supply. Dollar bills and coins are like "side chains" to the electronic banks deposits in the sense that we can go to the cash terminal and "convert" some of our balance to a "notes and coins" side chain.
I say "ostensibly" because this is how it appears - both technologically and intuitively. But if we apply systems analysis to each case, a very different conclusion emerges with regards to how the archetype should be implemented as a synthetic asset.
First of all, gold coins are of course an on-chain phenomenon since they are no less gold metal than their "nugget" antecedents. Meanwhile, notes and coins are actually further up the food chain than bank deposits since notes are central bank money whereas bank deposits constitute derivative money.
A bitcoin sidechain works by locking up and "baking" a deposited bitcoin for a sufficient amount of time that a secondary network can cryptographically rely on it to back a different type of synthesised archetypal asset. So this would be like, say "locking up" your notes and coins in a bank deposit to gain an electronic version of their value that you can transmit across large distances. Except - it's the wrong way around. We are moving from cash to a derivative. And so it is with sidechains which is why they can never support feature 2 of the cash archetype.
By way of recourse to archetypal analysis therefore, we can determine that side chains potentially support the following monetary archetypes faithfully:
- bank deposits (derived from their cash antecedents)
- various synthetic securities
- commercially backed utility tokens
- non-dollar national currencies under the Bretton Woods system
- cash
- any synthetic commodity
This may not seem all that important right now, but as cryptographic assets start to get whittled down to the core survivors it will be hugely important since the ability to port a divisible unit of the base asset and use in trade (as opposed to backing a monetary derivative) will categorically define the difference between a synthetic version of the cash archetype and a security (which is no different from what we have already had for centuries and does not need a blockchain).
An economic problem with sidechains
Lets look at sidechains from a completely different angle - macro economics. Maybe the designers thought about this already and gave them a politically motivated design priority and maybe they just didn't think about it at all. But one of the promoted technological "strengths" of sidechains (pegging) also has a crippling impact on bitcoin in economic terms.
If every other synthetic monetary asset is pegged to bitcoin, then their price cannot float freely in markets to reflect demand - only their liquidity (or "supply"). What this means is that deflationary/inflationary pressures are always transmitted to asset sectors in which they didn't originate.
For example, if the price of diamonds was always pegged to the price of gold, then a gold shortage would always result in an inflation of the diamond price - even if the market dynamics for diamonds was stable. "Mackerel coin" liquidity would likeways upset golf course attendances by transmitting deflation to "Golf Course Coin" sidechain by way of Bitcoin in the event of a fishing surplus and no market could be firewalled off from any other as thay are today in our multiple - currency world economy. (Venezuela is experiencing hyper inflation, but this is not immediatelly transmitted to the $USD or £GBP).
Sidechains and Monetary Properties
Finally, lets look at what sidechains do to the core, age-old recognised properties of money. In particular:
- fungibility
- divisability
- durability
- unit of account
Again - you can't have it both ways. Either "Mackerel Coin" is backed by bitcoin (in which case it's a security, not cash) or it has independent characteristics which should be independently valued in markets (in which case it can't be a sidechain).
https://theblog.adobe.com/prototyping-difference-low-fidelity-high-fidelity-prototypes-use/
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