Spacechains Unlocks Bitcoin Use Cases

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In the last article, I broke down what a spacechain is and how they work, but didn’t go into any of the things you can do with them. Ultimately, the lack of a two-way peg mechanism severely limits the functionality it can provide to Bitcoin users.

A One-Way Trip

The original idea of a sidechain was to have a two-way mechanism where bitcoin can be transported to entirely new blockchains, that can have any arbitrary functionality or features that users want to take advantage of, and then move them back. The idea was to allow for experimentation in features that is currently done by altcoins to occur with Bitcoin itself without having to alter or present risks to the main Bitcoin blockchain, but still allow users to utilize the Bitcoin token and not have to speculate on completely independent tokens to gain access to new functionality.

Economically, the thinking was that bitcoin on any sidechain would never significantly deviate from the price of bitcoin on the main chain, the reason being due to arbitrage trading. If a sidechain bitcoin ever became worth more than bitcoin on the main chain, you could simply transfer your coins to the sidechain, sell them for a profit, and repurchase bitcoin on the main chain. The same is true in the opposite direction. It’s essentially free money for anyone to capture, and so if such deviations occurred traders would quickly bring the price back in line.



Source link Bitcoin Magazine

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