Sidechains – e pluribus unum

This is the Blockcstream Sidechain white paper written by Adam Back, Matt Corallo, Luke Dashjr, Mark Fscreen-shot-2016-10-08-at-22-28-16riedenbach, Gregory Maxwell, Andrew Miller, Andrew Poelstra, Jorge Timón, and Pieter Wuille. Paper got the name Enabling Blockchain Innovations with Pegged Sidechains and it was published 2014-10-22. The paper  introduced the “sidechain” concept. Sidechains enable bitcoins and other ledger assets to be transferred between multiple blockchains. This gives users access to new and innovative cryptocurrency systems using the assets they already own. For Bitcoin blockchain sidechains offer one tool to balance the finite “determined at the start of history” nature of Bitcoin blockchain. This part of the sidechain idea became then effectively implemented by the Rootstock team who in 2015 published a whitepaper showing how the finite set of bitcoin transactions can be enriched with the infinite Turing complete machine Ethereum theoretically capable of expressing all tasks accomplishable by computers. I will write a Rootstock white paper commentary here  in December (2016).

For me personally the Blockstream Sidechain whitepaper was and still is THE most influential and interesting of the white papers in the cryptocurrency field. I personally learned and for the first time understood the social contract part of the Bitcoin blockchain. For example when the DAO hack happened and the Ethereum people focused on moving their wealth into the shelter of a new forked sidechain, the torch of this white paper flamed it’s bright white light and offered the conceptual tools to understand what really was happening in The DAO and the Ethereum community. For a short time there Blockchain showed it’s Leviathan face and the mechanisms that are creating perhaps the most important success factors of our societies – the e pluribus unum effect.

The original idea of the usability of side chains is related to the understanding that the immutability of the timestamped history recorded into the Merkle tree leaves of the blockchains is a kind of new social contract. Bitcoin motto “Vires in numeris” was already well known among the cryptocurrency enthusiasts in 2012. The understanding of the implications of that Credo was not, however, yet widespread.For example in December 2013 Carl Miller, research director at think tank Demos wrote an article that Wired magazine published with the name   What the arrival of Bitcoin means for society, politics and you.   The article ends with these words: … Vires in Numeris is not ringing hollow. We will likely wake up to a world that uses currencies secured by cryptographical systems, and it is time that our social and political institutions seriously consider what this will mean for them and the people they protect and represent. Yes Carl. Amen! But. The interesting point is that if you read that article, you soon realise that the writer actually documented the fact that at that time most of the people had no idea what really was behind those words Vires in Numeris.

Ten months later Blockstream team published this statement. New idea of social contract  between humans and machine intelligence got it’s first technically and philosophically valid explication.

The point this white paper makes is at the same time original AND deeply committed to the ideas of the Bitcoin whitepaper of Satoshi Nakamoto. It  can be found from the page 3  row 20. There the authors  point out that Bitcoin consensus mechanism can be seen as a new type of group signature –  a dynamic membership multi party signature (or DMMS). DMMs is  a digital signature formed by a set of signers which has no fixed size and where you do not need to identify each signer individually. Bitcoin’s blockheaders are DMMSes – dynamic multiparty – because their proof-of-work has the property that anyone can contribute with no enrolment process. Adam Back has proposed that this signature should be called Nakamoto signature.

The Leviathan has now been un-placed. It still exists and is. But now it’s being has been detached from any particular place, detached from any identifiable set of actors,  any nation state, it is detached from the authenticated authority of any individual king or parliament or CEO, it’s detached from Putins, Trumps, Mobs. Instead the contribution of Leviathan is weighted by the computational power of the anonymous machines.

A lot of that type of semi-philosophical mimblewimble could be written about the bitcoin transactions. But how can you turn all this to a business? For my company Nordledger the point of interest of this white paper can be found in Row 106:  The core observation is that “Bitcoin” the blockchain is conceptually independent from “bitcoin” the asset: if we had technology to support the movement of assets between blockchains, new systems could be developed which users could adopt by simply reusing the existing bitcoin currency. We refer to such interoperable blockchains as pegged sidechains.