It actually shouldn’t be difficult at all! If Altcoins are useful, they should have fee-paying users. Therefore, miners should want to claim these fees by making the Altcoin a blind-merged-mined drivechain.

Bitcoin Miners are actually the chief victims of Altcoin-value-dilution – other miners are getting money that they could have for free, if the Altcoins were instead merged-mined sidechains.

I think the issue is confusing, because most of the Altcoins we see today are not useful and therefore we would not want to absorb them into Bitcoin. And therefore, it is hard for Bitcoiners of today to imagine that absorption happening.

But really, if you think about it, if a given Altcoin persists as an Altcoin [and is not made into a sidechain], then that very fact is evidence that the Altcoin in question probably isn’t useful to anyone. Or else, it is because it has features that can’t be copied by any sidechain (see Monero answer), in which case this question is moot.

Four Part Answer:

i. Free Rider Problem

First, I acknowledge that ICOs/Premines/Altcoins do help, sometimes, to solve a free-rider problem of R&D of a coin.

However, despite Bitcoin’s disadvantage, it still seems to get all of the interesting, serious research. So apparently the lure of prestige is strong enough to motivate a healthy amount of R&D. Many universities regularly support Bitcoin R&D, especially MIT and Stanford.

Also, for-profit corporations (including Blockstream on the right as well as Coinbase on the left) support project R&D.

Finally, IMHO, most interesting work is done by hobbyists. Einstein, for instance, was a patent clerk when he wrote his four famous papers. Too much “financial support” and we lose the intrinsic motivation and the hunger for success.

Whatever the case may be, a great deal of software is written and evangelized today, without the “motivation” of doing an ICO (Ubuntu, Mozilla Firefox, etc). In fact, to most Makers, token sales are not a real incentive, they are instead a distraction and a hindrance.

ii. Labor Theory of Value Fallacy

Second, this question mis-emphasizes the makers of the technology. Instead, it should emphasize users. It should ask, “why should users use a sidechain, over an Altcoin/ICO scam?”. After all, made-but-unused things are irrelevant (and people will quickly stop making them); and vice-versa (all useful things that can be made eventually will be made).

That second question (the proper one) has some good answers: relative to Altcoins, sidechains can offer better convenience, quality control, and hashrate security. Most importantly, they shield the user from exchange rate risk.

This exchange rate risk is important in two senses. The first [trivial] sense is that the user does not have to deal with fluctuations in Altcoin/Bitcoin prices (which can be quite tremendous). The second [important] sense is that an Altcoin’s price may crash to zero.

iii. The Death of the Altcoins

A world without Altcoins may sound far-fetched today, but let us ask: “Where are all of these buy orders for Altcoins coming from?”. Certainly, there is a mixture of “fundamental” and “greedy” motivations – the fundamental is to take advantage of the Altcoin’s distinct feature set [now or in the future], and the greedy is to later resell the Altcoin to a greater fool (or “more appreciative collector”).

It should be clear that, once sidechains allow BTC to copy Alts, the fundamental motivation cannot survive. Even recreational gambling and money-laundering (to the extent that they are happening in Alts now, which is unclear) may continue to take place in sidechains designed for these purposes (probably a Counterparty-style “crypto Art” sidechain, and a Zcash sidechain).

I do not see how the greedy motivation can survive either. After all, “greed” alone is insufficient for scams – there must also be gullibility. Specifically, there must be a pretext [a narrative that is plausible, but false] of future fundamental value. For example, Ethereum’s pretext was “smart contracts”; for DASH it was “privacy” and sometimes “governance”; BitShares was “crypto finance” (or something). But with sidechains up and running, these pretexts cannot survive – after all, if the “smart contract” feature is a success, it will inevitably be copied. Alts will just be the suckers, who do all of the R&D and get none of the credit.

Sidechains are unable to emulate an Altcoin’s community. So the pretext-of-value will necessarily shift in this direction. But this is very unlikely to work for two reasons. First, as far as salience/recognizability is concerned, Bitcoin is still the leader – no one has heard of EOS but not heard of Bitcoin. Second, new Alt-communities have literally nothing to offer to new users. So these newcomers will look around and join “the biggest” community aka Bitcoin. It is basic network effects.

A final ingredient, which I intend to provide [on a sidechain no less!], is the ability to short Altcoins (to short anything in fact). This allows money to be made, as the bubble pops. Currently, in contrast, there is no easy way to profit from the overvalued Altcoin market.

iv. InterChain Combat

Currently, the blockchain projects are at war. During the XT dispute, DoS attacks were apparently so severe that they resulted in widespread Internet failure and even power grid failure! People are…saying mean things to each other on social media, to say the least.

These behaviors are attempts to “persuade” devs/promoters to change their crypto-allegiance. But if you develop on a sidechain, you are probably safe from this bullying/harassment.

Moreover, if there were just one crypto-project, then there would be no need for all of this “persuasion” in the first place. (This is why Maximalism is a moral position. )

Yes, [per sidechain] only one withdrawal can succeed every 3 months. Two can be in progress at once, if and only if one is more than halfway finished. Which means that we can expect total withdrawal time to take between 3 months (best case) and 4.5 months (worst case).

Some complain that such a system would be too slow to be usable, but replies of this kind disregard the effect of atomic cross-chain swaps, which are instant.

( Furthermore, while side-to-main transfers are slow, main-to-side transfers are quite fast, x~=10 confirmations. I would go as far as to say that, just as the Lightning Network is enabled by SegWit and CSV, Drivechain is enabled by the atomic swaps and of Counterparty-like ‘embedded consensus’. )

Thanks to atomic swaps, someone can act as an investment banker or custodian, and purchase side:BTC at a (tiny, competitive discount) and then transfer those side-to-main at a minimal inconvenience (comparable to that of someone who buys a bank CD). Through market activities, the entire system becomes exactly as patient as its most-patient members. As icing on the cake, people who aren’t planning on using their BTC anytime soon (ie “the patient”) can even get a tiny investment yield, in return for providing this service.

…why should I need to xfer my UTXOs from main-to-side at all? That’s inconvenient – with a hard fork, they just show up there.

Sidechains are “opt in”. So if you want to use the new feature, you must “opt in” to it.

…will the “SmallBlock mainchain” even have enough tx-bandwidth for all of our [LargeBlocker] coins to escape?

Well – eventually, each UTXO on the mainchain must be spent, if it is to have any effect at all on anything. So, if there is not enough bandwidth, then your mainchain UTXOs are lost in any case, and you have no choice but to hope for a hardfork blocksize increase.

However, the sidechain does not need to source its growth from main-to-side txns.

Two questions ago, I mentioned that an ‘investment banker’ type person could “specialize in patience”. They would hold sidechain coins and walk them side-to-main.

The same principle applies main-to-side. A very wealthy individual “Wally” could use a few main-to-side transfers to xfer a high quantity of coins. Wally could then charge a tiny premium on selling these coins in any manner – for example: via mainchain atomic swaps, in exchange for mainchain lightning-payments, in exchange for real-life goods and services.

So sidechains can grow in all the ways that Altcoins can grow.

There is an absolutely crucial distinction between:

  1. A problem with a sidechain that negatively impacts its parent chain.
  2. A problem with a sidechain that only impacts the sidechain users.

The first type of problem is unacceptable, but the second type of problem is actually desirable.

If we wanted to have the best BTC currency unit possible, we would want everyone to try all kinds of things out, especially the things that we think are terrible. We’d want lots of things to be tried, and for the losers to “fail fast”.

In practice I highly doubt the sidechain ecosystem would be anywhere near as dynamic as NYC or Silicon Valley. But these types of question, such as “What if a sidechain breaks / has DAO-like problems?”; “What if the sidechain has only a few nodes? Who will run them?”; “Who will maintain these projects?”; – really just miss the point. If the sidechain is garbage, that’s their problem, not yours!

Users who aren’t comfortable with the risks of new chains / new features, can simply decline to use them. If the benefits of a sidechain (to Person X) outweigh its risks (to Person X), the Person X will move some BTC there.

In other words: “What if a majority of BTC is moved to one sidechain, and then that sidechain has some kind of problem?”.

One simple solution would be to cap the quantity of BTC that can be moved to each sidechain, (perhaps at x=10% ; aka 210,000).

Other than that, I would point out that Bitcoin has always been the “money of principle”, and that we survived the MtGox announcement (in which ~850,000/12,400,000 = 6.85% of the total BTC were assumed to be stolen).