Subject: Re: [Bitcoin-development] libzerocoin released, what about a zerocoin-only alt-coin with either-or mining

From: Adam Back <[email-masked]>
Date: Sat, 13 Jul 2013 20:42:27 +0200

On Sat, Jul 13, 2013 at 11:51:14AM +0200, Jorge Timón wrote:
>I don't see the need to peg zerocoins to bitcoins.

Without a bitcoin peg on the creation cost of zerocoins, it is hard for a
new alt-coin to have a stable value.  Bitcoin itself is volatile enough.

Generally the available compute for mining is what it is, adding more
alt-coins just dillutes the compute available for a given coin.  (Modulo
different mining functions like scrypt vs hashcash there is some
non-overlapping available compute because different hardware is more
efficient, or even cost-effective at all).

Merge mining is less desirable for the alt-coin - its mining is essentially
free, on top of bitcoin mining.  Cost free is maybe a weaker starting point
bootstrapping digital scarcity based market price.

I think that serves to explain why bitcoin sacrifice as a mining method is a
simple and stable cost starting point for an alt-coin.  

>I think this could be highly controversial [alt-coin pegging].  Maybe
>everybody likes it, but can you expand more on the justifications to peg
>the two currencies?

Bitcoin sacrifice related applications do not require code changes to
bitcoin itself, which avoids the discussion about fairness of which alt-coin
is supported, and about sacrifice-based pegging being added or not.

I dont think it necessarily hurts investors in bitcoins as it just creates
some deflation in the supply of bitcoin.

>If you're requiring one chain look at the othe for validations (miners
>will have to validate both to mine btc) you don't need the cross-chain
>contract, you can do it better.

You can sacrifice bitcoins as a way to mine zerocoins without having the
bitcoin network validate zerocoin.  For all bitcoin clients care the
sacrifice could be useless.

Bi-directional sacrifice is more tricky.  ie being allowed to re-create
previously destroyed bitcoins, based on the sacrifice of zerocoin.  That
would have other coin validation requirements.

But I am not sure 1:1 is necessarily far from the right price - the price is
arbitrary for a divisible token, so 1:1 is as good as any.  And the price
equality depends on the extra functionality or value from the
characteristics of the other coin.  The only thing I can see is zerocoin is
more cpu expensive to validate, the coins are bigger, but provide more
payment privacy (and so less taint).  Removing taint may mean that zercoins
should be worth more.  However if any tainted bitcoins can be converted to
zerocoin via sacrifice at 1:1, maybe the taint issue goes away - any coins
that are tainted to the point of value-loss will be converted to zerocoin,
and consequently the price to convert back should also be 1:1?

>You could do something like this:
>
>https://bitcointalk.org/index.php?topic=31643.0

p2p transfer is a good idea.

Adam