"roles" for bitcoin and litecoin

[tcles]

I was reading a thread that isn't in the newbie section so I can't post there where they mentioned bitcoins being a pain for micropayments. We have the spin-off of bitcoin, litecoin which is essentially a clone of bitcoin but starting more recent and set up with a bigger max coin cap. Right now that's the main differences functionally, they are kinda just going to wind up being competing systems and hurt one another in the end because a lot of places wont really want to deal with both so people who buy goods and services will inevitably have to choose one or regularly exchange between the two on their own because it will be way too big of a headache for merchants/sellers to deal with two eCurrencys and in most cases a centralized fiat currency as well that their business/operation would use to operate.

It seems like if bitcoin and litecoin both don't take on some kind of roles they will just bump heads until the market determines these roles for them.

Litecoins seem much more suited for micropayments because since they are made to be less valuable, they will be able to do precision on smaller amounts (would essentially be like being able to have half dollars and half cents, but you deal in either dollars or cents and their values aren't hard pegged to each other. That kinda happens anyways, at least with the USD. I remember times when businesses had penny shortages and were literally willing to pay more then the value of the pennies to get them in bulk for the ability to make out proper change, so for a short time pennies unpegged themselves in a way).

Another reason litecoins would probably be better for micropayments is that currently they have a lower volume even though eventually they will have a higher volume and likely be worth an amount relative to the ratio of each to one another (which is favored of course would shift this a bit) but right now they are a lot newer. Micropayments tend to be aggregated into higher volume amounts. Sites that deal with lots of micropayments (like a site that gives many individuals rewards or kickbacks for stuff that are meant to accumulate over time. or has many users donating or exchanging petty cash to each other like forum where users issue dares or challenges for small rewards and maybe even other members decide to do their own private side wagers. Any system which has lots of very small amounts rapidly being transferred all over.) In communties with micropayments you always end up with the individuals who wind up with the bulk of the loot, these would likely wish to aggregate and cash out into "big boy" money like bitcoins or their local fiat paper money.

Even though bitcoins and litecoins are seperate currencies and not pegged to each other I still see it being a possibility for sites that cause lots of transactions or require something possible conversion to litecoins for micropayments on site to run their own bitcoin/litecoin exchanges on site rather then relying on major exchange sites because it's a lot less cumbersome when dealing only in electronic currency, when you throw national currencies into the mix it gets more complicated. Those who accumulate a lot of litecoins and wish to cash out into bitcoins can likely handle exchange right there on site since you will have a roughly similar amount of users on that same site wishing to buy litecoins with bitcoins so they can purchase services on the site.

A good example is quite a while ago a forum I was heavily active on was livingwithstyle.com it was part of an era when vBulletin was new and there weren't a whole crapload like there are now so you just had a handful that each discussed everything rather then zillions that all specialize. LWS had a post reward system which was an ecurrency called style points (that you could also purchase from the site for a pegged $1 for 1sp rate.) that you used to purchase all kinds of site services from custom avatars and membership levels, to "protected downloads" which was where individuals would require style points be paid for the links to files they uploaded for file sharing. This is just before the file uploading services like mediafire and loong before torrent p2p craze, so many of these were on these people's own webhosting and the protected downloads gave them a means to recoup some of the monthly dues on this. Naturally the people who posted lots of popular protected downloads normally accumulated vast amounts of sp that were sellable back to the site for $.50 for 1sp, so they would typically try and sell their sp right there in the forums somewhere inbetween the sites sell rate and purchase rate for sp. Likewise if litecoins take more of a micropayment role at the end of all those micropayments they will aggregate somewhere on the same site and can be exchanged for bitcoins directly on site to balance the surplus and recoup any deficit members or the site itself would have in being able to deal with other sites and services which choose to deal exclusively in bitcoins.

Anyways, just some ideas to throw out there since bitcoin and litecoin are so similar unless they take somewhat different directions from each other one will destroy the other or they will just hurt each other in preventing adoption by merchants until they take somewhat different directions or one destroys the other.

[DeathAndTaxes]

While a currency designed for micro-transactions would have some value Litecoin isn't it.  The number of decimal places isn't a real constraint.  Even if BTC was worth $100,000 USD:BTC it would still have precision down to 1/10th of a US cent.  

Litecoin is an almost direct copy of Bitcoin.  It has a shorter block interval, larger max, and a different hashing algorithm however these aren't material changes.   Nobody will care how/why the network is secure just that it is secure.  The shorter interval only matters on the first confirmation and 2.5 min vs 10.00 min doesn't facilitate realtime transactions.    The different hashing algorithm makes it worse for microtransactions.  Microtransactions implies lower value and thus lower fee value.  Having an independent hashing algorithm makes means the operating cost for the network can't be shared with other chains.

A currency designed from the ground up for micro-transactions could carve out a niche but Litecoin isn't that currency.

Something incorporation the following would be interesting:
a) very short block time (say 30 seconds?  some experimentation and testing would be required)
b) periodic ledger blocks (at say  to allow the tail of the blockchain to be discarded)
c) merged mining (to reduce operating costs)
d) low fixed fee structure
e) flat block reward (subsidy is x coins - fees)

[tcles]

While a currency designed for micro-transactions would have some value Litecoin isn't it.  The number of decimal places isn't a real constraint.  Even if BTC was worth $100,000 USD:BTC it would still have precision down to 1/10th of a US cent.  

Litecoin is an almost direct copy of Bitcoin.  It has a shorter block interval, larger max, and a different hashing algorithm however these aren't material changes.   Nobody will care how/why the network is secure just that it is secure.  The shorter interval only matters on the first confirmation and 2.5 min vs 10.00 min doesn't facilitate realtime transactions.    The different hashing algorithm makes it worse for microtransactions.  Microtransactions implies lower value and thus lower fee value.  Having an independent hashing algorithm makes means the operating cost for the network can't be shared with other chains.

A currency designed from the ground up for micro-transactions could carve out a niche but Litecoin isn't that currency.

Something incorporation the following would be interesting:
a) very short block time (say 30 seconds?  some experimentation and testing would be required)
b) periodic ledger blocks (at say  to allow the tail of the blockchain to be discarded)
c) merged mining (to reduce operating costs)
d) low fixed fee structure
e) flat block reward (subsidy is x coins - fees)

Yeah, that's an interesting take. Something to consider putting a team together for sometime in the future. A means of pegging to bitcoin value would be really awesome if it could be implemented somehow actually, too many different eCurrency directly competing on exchanges and for adoption with vendors/merchants is still trouble. That's my one issue with litecoin is that it's a lot of hassle for them to deal with both and exchange both with national paper currencies, how easily exchanged for each other are the litecoins and bitcoins because if there are lots of options offering straight exchanges then it seems like it would be liquid enough between the two that the competition would be healthy, but if you have to do buy/sell orders with a clearing house like it seems you have to do paper currency exchanges with either generally then I don't see how they wont end up butting heads a lot.