In the context of the two-way peg, the DMMS is represented by the Simplified Payment Verification Proof (SPV Proof), which is a DMMS confirming that a specific action on a PoW blockchain occurred. The SPV Proof functions as the proof of possession in the initial parent chain for its secure transfer to a sidechain. Symmetric two-way pegs are the primary type of two-way peg so we will only be referring specifically to the symmetric (compared to asymmetric) peg in this piece.
Note: Some would argue that such a system cannot be defined as a blockchain. Also, Blockchain is still in it’s early stages. It is unclear how the technology will pan out and will be adopted. Many argue that private or federated Blockchains might suffer the fate of Intranets in the 1990’s, when private companies built their own private LANs or WANs instead of using the public Internet and all the services, but has more or less become obsolete especially with the advent of SAAS in the Web2.
Mastercoin and Counterparty are embedded consensus protocols (or meta-protocols) that use the blockchain to store their transactional data. Bitcoin devs, except Peter Todd who was hired by both teams to help them find a proper solution, are very unhappy, to say mildly, about storing the data on the blockchain. Heated discussions on this topic go on for hundreds of pages on bitcointalk and Mastercoin github issue. Mining pools like Eligius started censoring Mastercoin transactions (not sure if they are continuing with this practice right now, but the operators of this pool are adamant that data do not belong to the blockchain).
Aelf uses a consensus algorithm called DPoS (Delegated Proof of Stake) that takes the best of both cooperative and competitive consensus algorithms. DPoS uses votes from stakeholders to achieve consensus. The competitive part is larger stakeholders having an influence on their delegate of choice. The delegates that have the most votes will take their turn to produce a block cooperatively in a sequence. DPoS makes transactions permanent. A rollback isn’t possible so a confirmation can be fast. DPoS is also scalable because anyone can participate in the consensus. Additionally, DPoS is environmentally friendly because electricity isn’t wasted like in Proof of Work.
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Smart contracts are immutable pieces of code and their outcomes are irreversible. Hence, formal verification of their code is very important before deploying them. It’s very hard to verify smart contracts in the Ethereum Virtual Machine (EVM). A business can’t afford to deploy faulty but immutable smart contracts and suffer the consequences of their irreversible outcome. This article details the challanges: “Fundamental challenges with public blockchains”.
Plasma is a proposed framework for incentivized and enforced execution of smart contracts which is scalable to a significant amount of state updates per second (potentially billions) enabling the blockchain to be able to represent a significant amount of decentralized financial applications worldwide. These smart contracts are incentivized to continue operation autonomously via network transaction fees, which is ultimately reliant upon the underlying blockchain (e.g. Ethereum) to enforce transactional state transitions.
Por lo tanto, y gracias a estas sidechains, se podrían conectar a Bitcoin soluciones con objetivos concretos, complementándole y aprovechando sus ventajas pero con la suficiente independencia. Para ello se usan unas piezas llamadas ‘two-way peg’, que son las encargadas de sincronizar las transferncias (validan y inmovilizan las monedas) entre ambas cadenas: la sidechain cuenta con unas monedas ya minadas pero sin dueño a la espera que, tras el intercambio, queden bajo el control del usuario que llega a esta cadena.
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Many people believe this is the future of the blockchain. It maintains network security and allows for scalability. The biggest criticism is that it heavily favors those with more funds as smaller holders have no chance of becoming witnesses. But the reality is, smaller players have no hope of participating in Proof of Work either, as mining from your own laptop at home is no longer a reality. Smaller players get outcompeted by bigger players who have massive mining rigs. STEEM and EOS are examples of DPOS blockchains. Even Ethereum is moving to POS with its Casper project.

A blockchain is a distributed computing architecture where every node runs in a peer-to-peer topology, where each node executes and records the same transactions. These transactions are grouped into blocks. Each block contains a one-way hash value. Each new block is verified independently by peer nodes and added to the chain when a consensus is reached. These blocks are linked to their predecessor blocks by the unique hash values, forming a chain. In this way, the blockchain’s distributed dataset (a.k.a. distributed ledger) is kept in consensus across all nodes in the network. Individual user interactions (transactions) with the ledger are append-only, immutable, and secured by strong cryptography. Nodes in the network, in particular the public network, that maintain and verify the transactions (a.k.a. mining) are incentivized by mathematically enforced economic incentives coded into the protocol. All mining nodes will eventually have the same dataset throughout.

Saying that, Interoperability has been the missing link in conquering the obstacles faced by both private and public blockchains by empowering them to interact and exchange values across platforms seamlessly. Developers use of the Gallactic blockchain technology, that allow for private and public blockchains within its eco-system, will drive the potential to combine both public and private blockchains with innovative new solutions, designed to accomplish cross-chain exchange and greater compatibility is the way forward for all parties and their concerns.

What Bitcoin’s development team is essentially doing through feature-creep is forcing everyone in the non-tech world to use Bitcoin through commercial proxies to avoid all this complexity (crypto-what? security? sidechain?), which effectively results in the loss of security, relative anonymity and decentralized properties that helped to make it interesting in the first place.
Sidechains offer a way for new, more radical settings and technologies to be implemented without affecting the main chain. This ensures that the main chain is as secure as possible whilst providing the freedom to explore options which would never be considered for use on the main chain. Sidechains should be quite powerful as they provide cases like anonymity, transparency, confirmation times and turing complete options like rootstock all whilst utilizing bitcoins rather than relying on the hashing power (security) of some far less secure alt coin. That being said… there is quite some controvery regarding blockstream’s funding of most of the core development team and their inflexiblity regarding the max blocksize. This inflexibility has directly contributed to the success of ethereum and it remains to be seen whether the dream of bitcoin maximalism will survive long enough for sidechains with all of the promised functionality to be rolled out. I am skeptical.
The problem with Ethereum is that transactions are executed one after another. However, Aelf differs in its parallel computing blockchain capability. It scales transaction computing power inside a single side chain. Now imagine the power when you have thousands of side chains. For any unrelated transactions, it is safe to execute them concurrently.
Always there is a balance in nature, even in blockchains. If you want to have extra features, you need to make a sacrifice from your current features. For example to have high speed and volume; you need to give some from your security & immutability by doing consensus with smaller groups or you need to use different methods in consensus like POS / PBFT. (Proof of Stake / Practical Byzantine Fault Tolerance)
Imagine over several hours, the camps produced a chain of messages that each required intensive Proof of Work. This means that the majority of the camps had to agree on this chain of messages and each camp can confidently trust the final outcome. It’s important to note here that Proof of Work does not care about the message itself, only that the nodes agreed to the final message. This majority network consensus keeps it secure and provides a solution to the Byzantine Generals Problem, leading to Byzantine Fault Tolerance.
A company called Blockstream has been focusing on these developments and has announced the release of Sidechain Elements, which is an open-sourced framework for sidechain development. It includes a functioning code and a testing environment for working with sidechains with several components: the core network software to build an initial testing sidechain, eight new features not currently supported by bitcoin, a basic wallet and the code for moving coins between blockchains.
Let’s switch gears quickly before we get back to talking about trust mechanisms. We’ll define what a “smart contract” is. The first blockchain that was popularized is obviously the Bitcoin blockchain. But the functionality of Bitcoin is very limited. All it can do is record transaction information. It’s only useful to keep track of the fact that Alice sent Bob 1 Bitcoin.
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Forbes reports that blockchain and biometric eyeball scanning technologies underpin the systems that support food distribution in the Syrian refugee crisis. While there are many further uses of blockchain, at the core of its business functionality is the creation of transparent, stacking “ledgers” of information. This is where private blockchain can prove extremely useful.

Transactions are cheaper, since they only need to be verified by a few nodes that can be trusted to have very high processing power, and do not need to be verified by ten thousand laptops. This is a hugely important concern right now, as public blockchains tend to have transaction fees exceeding $0.01 per tx, but it is important to note that it may change in the long term with scalable blockchain technology that promises to bring public-blockchain costs down to within one or two orders of magnitude of an optimally efficient private blockchain system


Bitcoin se acerca a los 10,000 millones de capitalización, con una infraestructura y usuarios que requieren que todas las ideas e innovación que se desarrolla a su alrededor cumpla con un nivel de seguridad y testeo tan elevados como el propio Bitcoin. Es por esto que, al menos hasta no ser algo totalmente definnido y fiable en la blockchain test de Bitcoin, no se podrá empezar a presionar para una posible implementación en la blockchain live.
Things get a bit more interesting when you replace the single custodian with a federation of notaries by way of a multisignature address. In this model, a federation of entities must sign-off on movements to and from the sidechain, so more parties must be compromised for a failure situation to unfold where the bitcoins frozen on the main chain are stolen.
Sometimes separate blocks can be produced concurrently, creating a temporary fork. In addition to a secure hash-based history, any blockchain has a specified algorithm for scoring different versions of the history so that one with a higher value can be selected over others. Blocks not selected for inclusion in the chain are called orphan blocks.[22] Peers supporting the database have different versions of the history from time to time. They keep only the highest-scoring version of the database known to them. Whenever a peer receives a higher-scoring version (usually the old version with a single new block added) they extend or overwrite their own database and retransmit the improvement to their peers. There is never an absolute guarantee that any particular entry will remain in the best version of the history forever. Because blockchains are typically built to add the score of new blocks onto old blocks and because there are incentives to work only on extending with new blocks rather than overwriting old blocks, the probability of an entry becoming superseded goes down exponentially[23] as more blocks are built on top of it, eventually becoming very low.[1][24]:ch. 08[25] For example, in a blockchain using the proof-of-work system, the chain with the most cumulative proof-of-work is always considered the valid one by the network. There are a number of methods that can be used to demonstrate a sufficient level of computation. Within a blockchain the computation is carried out redundantly rather than in the traditional segregated and parallel manner.[26]
Jump up ^ Shah, Rakesh (1 March 2018). "How Can The Banking Sector Leverage Blockchain Technology?". PostBox Communications. PostBox Communications Blog. Archived from the original on 17 March 2018. Banks preferably have a notable interest in utilizing Blockchain Technology because it is a great source to avoid fraudulent transactions. Blockchain is considered hassle free, because of the extra level of security it offers.
The top 10 Ethereum decentralized apps (DApps) have daily active user counts in the thousands. Compare this with a centralized platform like Facebook, which has over a billion daily users, and you can see just how small scale blockchain use still remains. For a detailed comparison, read “State of the DApps: 5 Observations From Usage Data (April 2018)”.
In this case, you work directly with the given blockchain tools and stack. Assembly is required, so this isn’t for the faint of heart at this point, as many of the technologies are still developing and evolving. However, working directly with the blockchain provides a good degree of innovation, for example in building decentralized applications. This is where entrepreneurs are creating ambitious end-to-end, peer-to-peer applications, such as OpenBazaar (on Bitcoin), or Ujo Music (on Ethereum).

Side chains have two main advantages. Their first advantage they have is that they are permanent. You do not have to create a new sidechain every time you need to use one. Once a side chain is built, it is maintained and can be used by anyone doing a specified task off the main chain. The other advantage of sidechains is that they allow interaction between different cryptocurrencies. Developers get the opportunity to test software upgrades as well as beta coin releases before they are released on the main chain.
Peer-to-peer blockchain networks lack centralized points of vulnerability that computer crackers can exploit; likewise, it has no central point of failure. Blockchain security methods include the use of public-key cryptography.[4]:5 A public key (a long, random-looking string of numbers) is an address on the blockchain. Value tokens sent across the network are recorded as belonging to that address. A private key is like a password that gives its owner access to their digital assets or the means to otherwise interact with the various capabilities that blockchains now support. Data stored on the blockchain is generally considered incorruptible.[1]
Let us call the current Bitcoin System Bitcoin 1.0 and the sidechain Bitcoin 2.0 So one would take one unit of Bitcoin 1.0 and send it to an unspendable address (e.g. 1111111111111111111114bRaS3) they’d also submit cryptographic proof of the transaction signed by the same private key that sent the transaction as a transaction into Bitcoin 2.0. The protocol of Bitcoin 2.0 would entitle the user to receive one unit of Bitcoin 2.0  This is called “One-way Pegging” as the value of one Bitcoin 2.0 is equal to one Bitcoin 1.0.  This system is only one way and creates a wormhole by which Bitcoin 1.0 disappears as there is no way of getting it back.
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Private blockchains, or as I like to call them, shared databases, have a place in improving efficiency for financial institution for back-office settlement processes. They should not be seen as controversial, or part of some dialectic struggle between punks and police. To the extent that the identifying shroud of AML/KYC can be placed into public blockchain metadata (possible in Omni Layer transactions over the Bitcoin blockchain) there may even be interoperability between these two sides of the train tracks. Right now, due to state-granted monopolies to issue credit, most of the world's liquidity is still in banks. However, we believe that in the long-term, public blockchains, especially those based on work, will come to take a more significant part in the ‘System D’ informal economy, which is where most of the global economic growth will originate.” 
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