Very soon there will recursive snark currencies all over the place.
One of them, and likely most of them, is going to have wrapped bitcoin -- a coin issued on their blockchain that is backed by a bitcoin reserve of equal value. Unfortunately such backing is apt to be lost or stolen.
The way to do wrapping right without the Bitcoin software being modified is threshold signatures as with Thorchain. A supermajority of voters, eighty or ninety percent threshold, from time to time vote a bitcoin transaction on the bitcoin blockchain that redeems wrapped bitcoin on the recursive snark blockchain, and also the same vote reallocates votes in proportion to new ownership of wrapped bitcoin.
(Schnorr signatures allow threshold votes to take up the same space as an ordinary signature, and a threshold signature is indistinghable from an ordinary signature, even if it is taken over a thousands of votes.)
# Step two
And, being a recursive snark blockchain, generate a snark that proves that bitcoin transaction and new allocation of votes was in accordance with the rules, to each holder of wrapped bitcoin on their home blockchain.
The wrapped bitcoin is still insecure, since the voters could vote wrongfully, but now the holders of wrapped bitcoin on the snark blockchain will know if the vote is wrongful. Which means the voters lose their wrapped bitcoin, but they do not care because they have the real bitcoin.
# Step three
The Bitcoin blockchain is modified to pay attention to the snark, and not propagate or accept the transaction if the vote is not in accordance with the snark.
Drop the voting, and just rely on the snark, so that the pegin pegout transactions becomes the equivalent to Litecoin's Hogex. The bitcoin blockchain is modified to accept the snark in place of the signature. The snark wrapped bitcoin is now as secure as bitcoin on the Bitcoin blockchain.
Since the snark wrapped bitcoin is now as secure as bitcoin on the main Bitcoin blockchain, transactions are far faster and cheaper, and vastly more powerful and general contracts are possible, over time everyone gradually moves their bitcoin to the snark blockchain, where it is wrapped in snarks, and slow and expensive redemption operations become rarer and rarer.
