Ethereum side chains in alphabet
On Monday, Blockstream released the first alpha version of their sidechains software. Used for testing Bitcoin software without putting real value at risk. If and when that protocol change happens, though, pegged sidechains will be as permissionless, and as decentralized, as Bitcoin itself. A whole different group has released an early draft of a radical new proposal called the Lightning Network , which would, in principle, move the vast majority of Bitcoin transactions off the blockchain, without sacrificing any verifiability or security.
I know, I know. There is no counterparty risk: These in-channel payments would be instant, unlike current Bitcoin payments, which require an hour to be fully verified on the blockchain. However, the Lightning Network would, again, require a change to the existing Bitcoin protocol. Sidechains Elements Alpha The distributed Bitcoin mining network performs quadrillions of calculations every second that maintain the integrity of its blockchain.
Confidential Transactions — At present, all Bitcoin transactions are completely public, albeit pseudonymous. Confidential Transactions , as the name implies, conceal the amount being transferred to all except the sender, the recipient, and others they designate.
Mind you, Zerocash would require an esoteric invocation ritual to initiate its network. Before the Oracle publishes its work, the same nothing is observed by anyone. After it submits, it is too late to do anything about the result! Clearly, we must somehow use multiple results …but multiple results delivered at one time will all be attacked simultaneously proof by simple addition, or task-redefinition.
The real trick is to use multiple results across time: Then, our focus is this very interesting and very common position: A group can harvest that surplus and divide it up , effectively coordinating their mutually-prosperous joint-future. So we need that long-run surplus to exist which it often does , and we need a way to get The Surplus to the right people.
Keep that in mind. The problem is fundamental unavoidable. As you might imagine, I was a little thrown by this idea. In contrast , no one at Ethereum seemed to even know what it was for , let alone care. While the production of a bootleg movie at least takes some effort on the part of the criminal, and the movie has some inferiority to the original, these Parasites are nearly-free to make, and have the ability to mimic their Host perfectly. How might we prevent Ethereum from supporting Parasite Contracts?
These are merely Contracts that scan their own blockchain for data. The generality is the problem: Of course, a single chain might enforce a globally-optimal set of rules, but who decides these rules?
How do we manage the permissiveness-security tradeoff without a central administrator? If there is a dispute over which rules should be included, who should resolve it? Using Sidechains, a decentralized group of self-interested miners can remove contradictions in coin-abilities such that total coin-ability is maximized. The world of Sidechains has the ideal global incentives for a prosperous blockchain-universe. This governing principle is desirable for users: Especially because my expectation is for a very small number of active Sidechains fewer than 10 , making the decision making process very straightforward.
Peter Todd emphasizes a key sidechain characteristic: But with the bad comes the good: In fact, after endorsing a sidechain, for the mining community to suddenly betray it would almost certainly call into question their general dependability. What of a pegged sidechain which does NOT merge-mine? Can such a sidechain escape the governance of the merge-miners?
Therefore, the hashrate is likely to be overwhelmingly insecure at all times: Every pegged sidechain needs a trove of at-risk BTC. An unreliable hashrate makes that initial-BTC hard to find. Once found, that BTC might vanish at any time, on the mere rumors of future tx-fee problems impending theft, new competition, disagreements with rival miners, government action, ….
Selective Sidechains can safely emulate Smart Contracts, but the reverse is impossible. When coupled with the network-effects of money, the resulting competition will likely obliterate any Altcoin smart contract system. In fact, you can always ask a human to just ask their hopefully post computer.
Moreover, Oracles can actually be mere computers. To get by, a software project of this immense scale and inter-connectivity needs large social networks of dedicated people and large monetary networks to find the money required to keep these people away from higher-paying jobs. It helps if a high-status organization like MIT can back a project as being technically useful and socially beneficial. Not only can Oracles emulate Contracts in general, but a specific Sidechain can emulate a ny specific Contract s.
Once someone copies any profitable non-parasite Contract into a new pegged sidechain, the only relevant difference between the two projects would be that one uses Bitcoin the dominant internet money and the other does not. Will this domain support life?
Will it be like the internet, where IP-defying torrent sites ThePirateBay, et al endure despite opposition? Parasite Contracts are too good at what they do. They differ from branded, reputable websites like PirateBay and biological parasites built out of organic matter in that  they are much easier to create quickly and that  subsequent Parasite Contracts are at no disadvantage.
In other words, the Parasites not only drain their Host of resources, but they also compete with each other for these drained resources. This perfect competition implies that the equilibrium behavior is for there to be a single Parasite per Host, operating as-cheaply-as-possible.
The parasites all theoretically survive, at cost. First, create a copy of each parasite with yourself as the owner. Now, all the parasites including your half are alive but unprofitable. Second, commit to doing this every time a new host is infected. Now it is unprofitable to create a parasite. But who would pay this tiny, nonzero cost? There is a free-rider problem, but the cost of de-parasiting is so tiny that it is unlikely to make a difference. Ultimately, as Bitcoin takes over the internet , all non-Bitcoin projects of any kind will be treated with the ridicule afforded a US resident who tries to pay for his milk with Japanese yen.
Eventually, interest in using a non-Bitcoin will fall to zero. So, the use-cases of Introspective Ethereum will either be absorbed into Sidechains or businesses designed for such a purpose, or simply fade away.
Even today, contracts are mostly self-enforced by the party who feels he would lose ie, lose to the Authority that he never plans to see. In the old days, competition kept Authorities in line. For example, in The Merchant of Venice , Shylock is trying to get a contract enforced by an Authority:.