> Part of what drives altcoin innovation is the chance for profit (I guess this drives a lot of innovation). Since Bitcoin sidechains are pegged 1-1, there is no chance for a lot of profit on each sidechain. So if you are starting a new altcoin, what are you more likely to do, create a sidechain where you can't make any money or create a separate currency with all kinds of potential?
I see this as a good thing. There are just too many people launching non-innovative altcoins with the only goal of getting rich quick or just for the sake of it. As someone who is mainly interested in the technical side of cryptocurrencies, this will allow me to quickly dismiss any altcoin which is not pegged to Bitcoin as a get rich quick scheme (unless they provide a pretty good technical reason).
Also, there are tons of incentives (apart from speculation) for creating altcoins, I wouldn't worry too much about about sidechains stifling innovation. On the contrary, it will allow people to use new altcoins without the risk of falling into pump and dump schemes.
> But why should Bitcoin be the currency, other than it was there first?
There's no other good reason in my opinion. In an ideal world, Bitcoin itself would have been pegged to an existing currency (e.g. USD) to allow for a more fair initial distribution but this was not possible due to the inherent limitations of fiat currencies. I like the concept of PoS/lower block intervals but as far as I know, those are still open problems (and Bitcoin's protocol could be changed over time to incorporate eventual solutions).
> But thankfully, we don't have to put all our eggs in one basket. The current system where multiple exchanges exist where you can go from one coin to another very quickly seems to work pretty well. Does everything need to be pegged to a single currency?
It works well but it's not a decentralised process which is what sidechains would effectively enable. Of course, some altcoins whose claimed innovation is directly tied to the mining mechanism would still continue to exist independently but this is not the case for most altcoins.
PS: People who believe having a theoretical single Currency would be bad thing usually base their argument on assumptions which do not hold in the cryptocurrency world. In the fiat world, the fact that there are multiple currencies is seen as a good thing because governments can manipulate currencies, restrict or impose their use, etc. Those considerations do not apply to cryptocurrencies. I personally believe that having a single cryptocurrency would be a good thing (I know, taboo!). I'm not sure if Bitcoin will be it though.
It's rather easy to trade cryptocurrencies in a decentralized manner. BTC goes into multisig, you receive the altcoin, BTC goes out of multisig. It only gets hard when dealing in fiat.
Nothing can stop people from falling into fraudulent schemes. Many altcoins are heavily premined, the developers are BS, or the developers have a disproportionately large upside compared to investors. But all of that should be apparent to all onlookers.
The main problem I see with sidechains is that 51% attacking them is made easy by default. Unless you negotiate deals with huge mining pools, there's not enough security, and BTC can be stolen from sidechains if miners attack it. So the idea of sidechains looks dependent upon mining centralization which is a big enough issue already.
I wholeheartedly agree with other posters. Blockchains just aren't good at certain use cases. You can't do HFT on a blockchain, even one with 10 second blocks. OTOH, the blockchain is censorship resistant and pseudonymous. In areas where excessive rules and regulations push out the little guy, the blockchain can be a solution.
I see this as a good thing. There are just too many people launching non-innovative altcoins with the only goal of getting rich quick or just for the sake of it. As someone who is mainly interested in the technical side of cryptocurrencies, this will allow me to quickly dismiss any altcoin which is not pegged to Bitcoin as a get rich quick scheme (unless they provide a pretty good technical reason).
Also, there are tons of incentives (apart from speculation) for creating altcoins, I wouldn't worry too much about about sidechains stifling innovation. On the contrary, it will allow people to use new altcoins without the risk of falling into pump and dump schemes.
> But why should Bitcoin be the currency, other than it was there first?
There's no other good reason in my opinion. In an ideal world, Bitcoin itself would have been pegged to an existing currency (e.g. USD) to allow for a more fair initial distribution but this was not possible due to the inherent limitations of fiat currencies. I like the concept of PoS/lower block intervals but as far as I know, those are still open problems (and Bitcoin's protocol could be changed over time to incorporate eventual solutions).
> But thankfully, we don't have to put all our eggs in one basket. The current system where multiple exchanges exist where you can go from one coin to another very quickly seems to work pretty well. Does everything need to be pegged to a single currency?
It works well but it's not a decentralised process which is what sidechains would effectively enable. Of course, some altcoins whose claimed innovation is directly tied to the mining mechanism would still continue to exist independently but this is not the case for most altcoins.
PS: People who believe having a theoretical single Currency would be bad thing usually base their argument on assumptions which do not hold in the cryptocurrency world. In the fiat world, the fact that there are multiple currencies is seen as a good thing because governments can manipulate currencies, restrict or impose their use, etc. Those considerations do not apply to cryptocurrencies. I personally believe that having a single cryptocurrency would be a good thing (I know, taboo!). I'm not sure if Bitcoin will be it though.