Can Sidechains Turn Bitcoin into the Reserve Currency of the Internet?

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Can Sidechains Turn Bitcoin into the Reserve Currency of the Internet?

Bitcoin developers are weighing on Sidechains proposal which has come from a section of the developers who think that this can help the digital currency emerge as the reserve currency of the internet. Sidechains is a concept that is still under development and has been highly contested by certain members of the Bitcoin development community.

However, according to some Bitcoin developers, if Sidechains works, this could effectively turn Bitcoin into the reserve currency of the Internet. Nonetheless, as these days, everyone wants to add new features to the Bitcoin block chain, even the addition of Sidechains is being added into the list of inventions that can help the digital currency further.

The developers of Sidechains believe that the real world trends towards one currency whenever possible, and it’s possible that there is no need for more than one scarce resource in the digital realm. The project is receiving hefty backing from a group of developers like Adam Back.

Adam Back, the developer of the HashCash, the algorithm Bitcoin uses to generate and verify currency has come in support of Sidechains. He has received support from Austin Hill, a Canadian entrepreneur and angel investor who in 1997 founded Zero-Knowledge Systems, an anonymous networking and privacy technology company.

The Concept of Sidechains Can Turn Bitcoin into a Reserve Currency

A lot of developers involved in the project believe that Sidechains, a method of creating new tokens of value without going outside of the Bitcoin currency network, can turn Bitcoin into a reserve currency. According to them though many altcoins are currently traded on exchanges, these altcoins have their own exchange rate and the Bitcoin network effect is holding back their usefulness as money.

However, in a Sidechains ecosystem, new tokens can only be created when Bitcoin are frozen i.e. users have to deactivate Bitcoin if they want to issue a new currency on a Sidechain. This in effect will mean that the new cryptocurrency is effectively backed by Bitcoin i.e. users could freeze ten Bitcoin and create 40 Litecoin on a Sidechain.

Thus, in effect those Litecoin trade at 0.25 BTC rather than having their own exchange rate. This according to the Bitcoin analysts is similar to the fixed exchange rates that were traditionally used between gold and fiat currencies.

To contact the reporter of this story: Deepak Tiwari at deepak@forexminute.com