[bitcoin-dev] extension-blocks/sidechains & fractional/coin-cap/demurrage (Re: Let's deploy BIP65 CHECKLOCKTIMEVERIFY!)

[Dr Adam Back via bitcoin-dev]

Micha I think you are correct, I dont think extension blocks (or
sidechains for that matter) can allow soft-fork increase of the total
Bitcoins in the system, because the main chain still enforces the 21m
coin cap. A given extension block could go fractional, but if there
was a run to get out, the last users out will lose, or they'll all
take a hair-cut etc. So presumably users would decline to use an
extension block with fractional bitcoin.

I mean you could view it like say an exchange (mtgox?) that somehow
accidentally or intentionally creates fictional Bitcoin IOUs in it's
system, eg in some kind of pyramid scheme - that doesnt create more
Bitcoins, it just means people who think they have IOUs for real
Bitcoins, are fractional or fake. With an extension block or
sidechain furthermore it is transparent so they will know they are
fractional.

Relatedly it seems possible to implement a sidechain with advertised
demurrage, with an exit or entrance fee to discourage holding outside
of the chain to avoid demurrage. There are apparently economic
arguments for why people might opt in to that (higher velocity
economic activity, gresham's law, merchants offering discounts for
buying with demurrage Bitcoins, maybe lower per transaction fees
because say miners can mine the demurrage). However that is a
different topic, again not changing the number of coins in
circulation.

Adam


On 7 October 2015 at 08:13, Micha Bailey via bitcoin-dev

On Monday, October 5, 2015, Mike Hearn via bitcoin-dev

As Greg explained to you repeatedly, a softfork won't cause a
non-upgraded full node to start accepting blocks that create more
subsidy than is valid.

It was an example. Adam Back's extension blocks proposal would, in fact,
allow for a soft forking change that creates more subsidy than is valid (or
does anything else) by hiding one block inside another.

Maybe I'm missing something, but wouldn't this turn into a hard fork the
moment you try to spend an output created in one of these extension blocks?
So sure, the block that contains the extension would be considered valid,
but unupgraded validators will not update the UTXO set accordingly, meaning
that those new TXOs can't be spent because, according to their rules, they
don't exist.

[Venzen Khaosan via bitcoin-dev]

Exactly,

In the coming fee market crunch, any speculator would trade an
extended block in the implied direction and also hedge in the opposite
direction in case it gets rejected.

The speculative public will most likely trade in the same direction,
initially, but arbitrage and futures markets perspectives (generally
more informed) will go the opposite way and create a new chart pattern
that will precede contrarian price motion.

In the end, as the community illusion of non-interdependce fades, we'd
expect bitcoin price to tend to its natural condition: parity with the
most powerful fiat currency out there: the psychological King, the US
dollar.

After decades we could expect an inverse correlation to develop as the
majority world moves from paper to digital - barring a critical
survival event such as a solar EMP, which is due, but which I reserve
judgement upon for investment purposes.

You can buy coffee with XT bitcoins, but that is really small-minded
behavior in the current deflationary environment... Mike Hearn, you
economic imbicile, give me 15 minutes with you in public and I will
knock you out of the Bitcoin space forever...


Venzen Khaosan

Post by Dr Adam Back via bitcoin-dev
Micha I think you are correct, I dont think extension blocks (or
sidechains for that matter) can allow soft-fork increase of the
total Bitcoins in the system, because the main chain still enforces
the 21m coin cap. A given extension block could go fractional, but
if there was a run to get out, the last users out will lose, or
they'll all take a hair-cut etc. So presumably users would decline
to use an extension block with fractional bitcoin.
I mean you could view it like say an exchange (mtgox?) that
somehow accidentally or intentionally creates fictional Bitcoin
IOUs in it's system, eg in some kind of pyramid scheme - that
doesnt create more Bitcoins, it just means people who think they
have IOUs for real Bitcoins, are fractional or fake. With an
extension block or sidechain furthermore it is transparent so they
will know they are fractional.
Relatedly it seems possible to implement a sidechain with
advertised demurrage, with an exit or entrance fee to discourage
holding outside of the chain to avoid demurrage. There are
apparently economic arguments for why people might opt in to that
(higher velocity economic activity, gresham's law, merchants
offering discounts for buying with demurrage Bitcoins, maybe lower
per transaction fees because say miners can mine the demurrage).
However that is a different topic, again not changing the number of
coins in circulation.
Adam
On 7 October 2015 at 08:13, Micha Bailey via bitcoin-dev

On Monday, October 5, 2015, Mike Hearn via bitcoin-dev

As Greg explained to you repeatedly, a softfork won't cause
a non-upgraded full node to start accepting blocks that
create more subsidy than is valid.

It was an example. Adam Back's extension blocks proposal would,
in fact, allow for a soft forking change that creates more
subsidy than is valid (or does anything else) by hiding one
block inside another.

Maybe I'm missing something, but wouldn't this turn into a hard
fork the moment you try to spend an output created in one of
these extension blocks? So sure, the block that contains the
extension would be considered valid, but unupgraded validators
will not update the UTXO set accordingly, meaning that those new
TXOs can't be spent because, according to their rules, they don't
exist.

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