Counterparty as sidechain?

It seems to me that (theoretically, in-principle,…:wink: all the features of Counterparty could be reimplemented in a sidechain, which would permit operating in Bitcoin without extra layers. Thoughts?

Sidechains are much less secure, it would not be feasible for financial purposes

Why do you think sidechains are in principle much less secure for financial applications? I tend to think that all necessary security features can be implemented in a sidechain, given time.

Counterparty is already arguably a special case of a Sidechain. By burning (or locking) the Bitcoins in the Bitcoin Blockchain, XCP tokens were instantiated from the burnt balance. And it is arguably merge mined with near 100% of the Bitcoin mining power.

Sidechains as they have been proposed by the Blockstream team will be much less secure than the full Bitcoin Network.

Sidechains have been described as “altchains without the altcoins”. Counterparty could be described then as “altcoins (assets) with out the altchains”. They can be complementary technologies.

See here for more information - https://forums.counterparty.io/discussion/418/the-crossparty-protocol

Why do you think sidechains are _in principle_ much less secure for financial applications? I tend to think that all necessary security features can be implemented in a sidechain, given time.

It was explained by Vitalik B and Peter T a while ago

Why do you think sidechains are _in principle_ much less secure for financial applications? I tend to think that all necessary security features can be implemented in a sidechain, given time.

It was explained by Vitalik B and Peter T a while ago

The Blockstream team admit it themselves here - http://www.blockstream.com/2014/10/30/a-look-at-a-few-questions-and-misconceptions-for-pegged-sidechains/


Should there be concerns surrounding merged-mining security?

There has been a lot of discussion surrounding the security of sidechain mining power, especially the security of merged-mining, where there is often little incentive for miners to behave honestly.

Pegged sidechains are orthogonal to merged-mining and each sidechain may choose to be either merged-mined or have its own, separate, mining power. However, in a world where many sidechains might have less mining incentive than other merged-mined chains today, resisting hashpower attacks potentially becomes much more difficult.

Section 6.1 of the paper covers some of the ways in which a sidechain can defend against hashpower attacks by providing miner incentives or limiting the ability of hashpower attackers to steal coins. While we don’t have a silver bullet, any sidechain which is mined with sufficient and decentralized hashpower can be as secure against hashpower-attackers as Bitcoin, and we believe there is ample room for miner incentives to provide that.

Will the sidechain technology make Bitcoin centralization more likely?

Because there’s potential for fees and other miner incentives to be split across sidechains, our paper dedicates a section to discussing the possible increase in cost to mine profitably, potentially acting as a centralizing pressure in Bitcoin mining. However, in section 4.3, the paper describes the ability of a miner to: dynamically enable and disable mining on individual sidechains as they validate blocks, mine transactions validated by a third party (similar to the way pools work today), and partially validate a third-party-provided consensus.

With only such basic practices, we believe there’s ample room for miners to receive maximum income with only very slight increases in centralization, keeping both Bitcoin and sidechains sufficiently decentralized and secure.


Counterparty is already sort of a ‘sidechain’, but it has a much closer link to Bitcoin than sidechains can have. Unfortunately the process of saving data to the blockchain doesn’t have a buzzword to describe it. Maybe we can come up with one:
“Blockchain Database”
“BTC Datachain”
“Blockchain-internal pseudosidechain mechanism”

  • Internal Chain
  • Embedded Chain
  • Complementary Chain

The Embedded Chain provides far better security than the frankly obscure “side” chain, all thanks to the stability of the Bitcoin Blockchain Database.

Can’t resist a good naming thread.

  • Deep data
  • Seamless tx
  • DaT (Data-as-Transaction think SaaS)
  • Virtual Chain (Counterparty is a sort of VM)

Mirrorchaining
Satoshi’s Ghost: Your Bookie and Broker
Nakamoto’s Space in the Margins
Financial Datachain
Counterchain


Side Party



Counterchain is good. This went off topic very quickly. Counterparty will inevitably benefit from Sidechain development and I’m sure the current development team are aware of this and may turn their attentions to “Counterchains” as the current Counterparty Protocol implementation and ecosystem matures.

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I frankly don’t see the point in changing from a one way peg to a two way peg… What would be the benefits?

We’re talking about different things: Imagine if every DEx related Counterparty transaction was sent to a sidechain instead with a faster block time and the result of the trades there were accounted for in the mainchain. This way you get the security of the main chain for most applications but you get the speed of the side chain for real-time trading.