TheBlueMatt

We will be posting more at https://github.com/blockstream as we work :)

In order to two-way-peg bitcoin (the asset), Bitcoin (the chain/protocol) must be extended to support the SPV proof of possession discussed in 3.2 of the paper as well as the contest period (and related reorg proofs). While these changes (if accepted by the greater Bitcoin community) will take some time to design, implement and deploy (ie merge into Bitcoin Core and soft-fork the Bitcoin network after miners have upgraded), we provide a more trusted method to perform tests of sidechains without changing Bitcoin in appendix A of the paper.

"The first sidechain" is up to the community. I'm sure "the first sidechain" will be identical to Bitcoin (for testing), but once they are readily available, rollout of all kinds of crazy sidechains will take weeks.

Many colored coin protocol designers have independently suggested changes to Bitcoin's protocol (usually in the form of script changes) to make colored coins more performant/scalable/etc, which could be implemented on a sidechain. You can of course create a sidechain which recognizes colored coins proofs and imports colored coin assets.

We'll build open source solutions that everyone, including governments are free to use.

Sidechains/the two way peg mechanism are a protocol not specific to Bitcoin. As noted in the paper, while we think sidechains will see the most use on Bitcoin due to its network effects, I wouldn't be surprised to see an altcoin ship an early sidechain implementation before Bitcoin has a chance to have a community debate and (maybe) do a soft fork.

You cant readily transfer the non-Bitcoin asset to the bitcoin blockchain (as bitcoin is designed to handle one asset) without a protocol similar to colored coins. However, you can transfer it to any other properly-equipped sidechain.