[Brainstorming] Namecoin could benefit from sidechains

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tosh0
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[Brainstorming] Namecoin could benefit from sidechains

Post by tosh0 »

Since the topic of the day at /r/bitcoin is sidechains, with even a paper, it'll be nice to start a discussion about this.

First: they propose bitcoin backed sidechains, however it is possible to enable namecoin to have sidechains and at the same time to be a side chain of btc with the particular property of a floating exchange rate. This will enable the first ever on blockchain exchange that doesn't oblige you to own ether, nxt or other questionable alt-coins.

This could prove to be useful as it brings even closer the network effect of btc to nmc and allows miners to do other things with their nmc like experiment and issue sidechains of their own.

Your thoughts.
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domob
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Re: [Brainstorming] Namecoin could benefit from sidechains

Post by domob »

I don't quite get how the floating exchange rate would work (or rather, how it would be different from the status quo of Namecoin being simply a merge-mined altcoin). However, of course, a Namecoin-like name-value system could be implemented also as a side-chain. This seems like an interesting idea. But I think that for now, all of this is just theory and speculation - I think we can come back when the concept is actually proven in practice and fully implemented.
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biolizard89
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Re: [Brainstorming] Namecoin could benefit from sidechains

Post by biolizard89 »

My understanding of the paper is that the exchange rate has to be deterministic (although not necessarily constant).

I agree with Daniel that, while this is a quite cool proposal, we really can't do anything with it until the code is implemented and ready to use. Basically the same situation as we have with Zerocash in that respect. Like Zerocash, I personally have no objection to the idea, although the devil is probably in the details.
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domob
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Re: [Brainstorming] Namecoin could benefit from sidechains

Post by domob »

biolizard89 wrote:My understanding of the paper is that the exchange rate has to be deterministic (although not necessarily constant).
Yes, that's true - the exchanging transactions can be implemented in whichever way the side-chain sees fit. The only constraint is that you can't pay out more Bitcoins to the main chain that were paid into the side-chain. But I don't see how this could implement us to have NMC with a floating exchange rate but in some way different from now.

What would be possible is to keep NMC (the currency) separate from the deposited side-chain BTC (which is just what we have now) but allow both NMC and side-chain BTC to pay for names. Since the BTC paid for names are effectively "destroyed" on the side-chain but still exist on the Bitcoin chain, we could instead distribute them according to some system - for instance, pay NMC holders (a bit like Bitshares) or use them to buy up NMC on the open market or something. But that will be decided if more details are known and we actually decide (based on these details) to turn Namecoin into a side-chain.
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tosh0
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Re: [Brainstorming] Namecoin could benefit from sidechains

Post by tosh0 »

My understanding is that regular sidechains won't have any coins to start with (unless get-quick-rich pump&dump alt.chain of the day) and people can "buy" and "sell" them at a fixed exchange rate. Possible benefits: shorter block time, lower fees, issue shares etc.

In the case of NMC. It could be what domob says or it could be that people will make "offers for exchange" on the blockchain: ie: I sell 1btc for 500 nmc and then people with NMC that agree will accept them or publish their own offers.
Anything is theoretically possible. Keep in mind miners don't have any incentive to mine coinless sidechains, but have some with NMC.
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biolizard89
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Re: [Brainstorming] Namecoin could benefit from sidechains

Post by biolizard89 »

tosh0 wrote:My understanding is that regular sidechains won't have any coins to start with (unless get-quick-rich pump&dump alt.chain of the day) and people can "buy" and "sell" them at a fixed exchange rate. Possible benefits: shorter block time, lower fees, issue shares etc.
That seems likely in many cases, but is not by any means dictated by the spec. Bitcoin itself would be a sidechain of any other currency that implements the spec. There is nothing unique about Bitcoin here.
tosh0 wrote:In the case of NMC. It could be what domob says or it could be that people will make "offers for exchange" on the blockchain: ie: I sell 1btc for 500 nmc and then people with NMC that agree will accept them or publish their own offers.
That has nothing to do with sidechains as far as I know. TierNolan's scheme for atomic cross-chain swapping doesn't require sidechains. You could do it today. (Well, almost... I think multisig is required.)
tosh0 wrote:Anything is theoretically possible. Keep in mind miners don't have any incentive to mine coinless sidechains, but have some with NMC.
That is not true. Miners for Namecoin will earn tx fees for any bitcoins that go through the system, even if namecoins as a currency don't exist. Block rewards are temporary anyway; Bitcoin itself will end up rewarding miners with tx fees exclusively in the not-too-far future.
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