How do broken bitcoin transactions work

Does a segwit based side chain like the lightning network allow a broken reserve?

While the other answers did a good job of explaining why the statement is misleading, I want to point out that it is technically true. Again he said:

This is because systems like the separate certificate allow the introduction of partial reserve systems in Bitcoin.

And that's true. If you want, you can build a fractional reserve bitcoin system based on a separate witness. Lightning is no such a system, but anyone who wanted it could build one. (And you could imagine a system very similar to Lightning, using SegWit in the same way, but allowing fractional reserves.)

Whether this is a reasonable reason to oppose a separate testimony, I would argue that it is absolutely not. Each powerful feature or system can be used by other people to do things we might prefer not to do. If the fact that it could be used to build a fractional reserve system is a reasonable reason to stand against separate witnesses, then the fact that it could be used to finance terrorism is a reasonable reason to stand up against Bitcoin itself to deliver.

Murch ♦

Just wondering how SegWit is changing that, since you could already build a fractional reserve system on vanilla bitcoin.

David Schwartz

SegWit makes it easier and cheaper to get money into and out of such a system, among other things.

Daniel Morritt

@ DavidSchwartz You make a good point but I don't see SegWit allowing something that is not yet possible. At the end of the day, a SegWit transaction is just like any other, isn't it? How the data is stored does not matter.

David Schwartz

@ DanielMorritt I agree that SegWit won't allow anything that can't be done in other (possibly worse) ways. If you read the quote in such a way that implicit reserve systems are not possible without SegWit, then this is of course wrong. (I don't read it like that.)

Daniel Morritt

@DavidSchwartz Ahh OK, I read "This is happening because schemes like separate witnesses allow introduction" and it sounds to me like it is worded in such a way that it implies that it is not already possible.