Litecoin seems to solve the wrong problem with Bitcoin.
Bitcoin's mining difficulty is calibrated fine for having a fixed limit. It's the fact that Bitcoin and Litecoin both stop at a fixed amount of units that makes them ultimately deflationary currencies that don't reward spending.
BitCoin is unique in that you can get an exact, real time measure of how the 'economy' is doing, whereas with the American economy these measures are extrapolated based on statistical work. Somebody should fork bitcoin and create a monetary policy adjustment algorithm that responds to changes in the transaction rate and prints more money (i.e., adjusts mining difficulty) in response. They should also remove the fixed ceiling.
I'm not sure why people have a problem directly with the fixed bitcoin limit. Unless there are some radical changes in medicine in the next few years, none of us will ever live to 2140 to see it.
The fixed BitCoin limit means the rate of production of BitCoin is also fixed, or changes in a determined way. It can't be decreased or increased in response to changes in the rate of spending. I think a monetary policy algorithm might actually adjust the rate of production of the coin upwards to counteract deflation.
I imagine you'd struggle to do that reliably though. There's little indicators in the blockchain as to what an individual coin is worth, and relying on any external source for data would ruin the decentralised mantra that the currency is built upon.
you mean the exchange rate? it wouldn't need to know the exchange rate, just what volume of bitcoin is changing hands at any given point in time which is part of the blockchain.
I could make two node spam transactions between themselves to drive the rate up, or make non-relay nodes to poison the network and make it go down. There's no way of really knowing how many parties are using the blockchain.
Actually Litecoin MIGHT jsut solve "the deflation problem":
More specifically, having a number of BTC clones of "varying degrees of 'dilution'" in constant competition might, via emerging floating "exchange rates" (from arbitration traders), "balance" what the missing "monetary overlord" cannot technically pull off. Could that be? Ever-evolving store-of-value versus medium-of-exchange demand in the network may be ever-shifting to the various currencies based on their intrinsic un-changable core "policies" (inflationary Freicoins vs. deflationary Bitcoins) and other market dynamics, no?
I'm no game theorist right now so I can diagram it out but hey, something to think about, no? It just "might" contribute to "easing" the "problem".
I agree that someone should fork bitcoin and fix the mining problem. But screw transaction rates, the mining difficulty shall be determined by the nodes (people) participating in the network. Periodically, every node votes and a (weighted) average determines future mining difficulty. It may be a technical problem, but it may also be the right solution. And it will make the bitcoin more democratic.
Of course, otherwise people will treat bitcoins like oil, another scarce resource, and not use either. Land too is limited, which is why it's never sold. /s
What this talk of the future value of things requires is a full understanding of opportunity cost, etc. If all you ever did was buy food, you'd get more if you didn't buy today and bought tomorrow, assuming food prices remained stable and your BTC increased. But you need food today.
Similarly, you might want to start a business which would be more profitable than waiting for bitcoins to appreciate.
Being open to donations in Litecoin isn't a very big risk to take. They could also accept donations in HN karma or WoW gold if the infrastructure enabled them to do so. It's not like it costs them anything.
When people start accepting payments in Litecoin, it will be noteworthy.
Agreed that its not a huge risk, but you can't spend HN karma. Litecoins can be converted to cash though, so there's at least some difference between the two.
This is the second Litecoin article I have seen today. Is there enough space for two cypto currencies? What problems does Litecoin solve apart from giving a second chance to those that missed out on the easy early mining of bitcoins?
"Litecoin provides faster transaction confirmations (2.5 minutes on average) and uses memory-hard, scrypt-based mining proof-of-work algorithm to target the regular computers and GPUs most people already have." http://litecoin.org
I remember that the original goal was to encourage CPU mining and Litecoin failed at this.
Not to mention, with faster (easier) confirmations you need more of them to form the same cumulative proof of work. If anything, Litecoin is magnitudes weaker due to the slower hashrate compared with Bitcoin.
> If anything, Litecoin is magnitudes weaker due to the slower hashrate compared with Bitcoin
But that doesn't say anything about Litecoin, it only says something about Litecoin's current state of being. Bitcoin could similarly be said to have a hashrate surmountable by a few wealthy companies working together. Things will improve over time, and certainly if Litecoin proves to be the better, it will have a bigger hash rate than Bitcoin.
It's like saying "Windows is better because more people use Windows". Yeah of course there is more support for the most used platform, but that doesn't say anything about the quality of a newly released OS X. It may well be better, and in ten years it might be biggest. Not saying it will be, but it might. Same goes for Bitcoin vs Litecoin hashrate.
In the long run there is probably room for even more than two crypto-currencies, as long as each of them is unique enough to have its own set of advantages and disadvantages.
Litecoin however is merely a fork of Bitcoin with changes to a few trivial properties, I can't imagine it ever gaining as much traction as Bitcoin itself.
Oh I can totally see where this will be going from now on. It does set a useful precedent!
Next up: "LiterCoin---will never exceed 168 circulation units!"
LitestCoin---336 max, guaranteed!
Way to dilute this originally neat "digital gold" idea. So turns out, while you can't clone BTC, we can copy ideas infinitely, unlike say some heavy-weight metals rooted firmly in the tangible physical plane :)
Now people will argue "but BTC have all the first-mover network effects!". Yes, for a time but things move lightning fast on this web we all love, and don't the "thoughts of many nations" about "high-value proofed against the elements, politics, technology and time itself" develop over millenia---generations and generations of attempts to cheat, "corner", fake or "resource alternatives" a unit only to always admit defeat in the face of the one superior element?
That is, for those looking for a "hard, deflationary, non-dilutable" asset. Those will, looking harder, easily find a better one of "ancient world-class proportions". Those looking for "soft, inflationary, dilutable" transactional currency of course won't be looking into BTC and its upcoming hundreds of clones anyway.
Let's face it, not every alternative clone will even make it to a major exchange but many do! LiteCoin was scheduled for MtGox, many other multi-currency exchanges let you trade (and thus arbitrage) various BTC clones ad infinitum. "Currency wars" to follow? ;)
And a couple of them will easily see the same early adopter patterns of BTC. Look as LiteCoins are already valued at $3!
Three bucks for the 2nd-in-line digital crypto-currency. And that's just early adopter geeks happy they have a new toy they can still mine with consumer-grade hardware (ha, gonna play with that myself I think!) and cash out when convenient. Nothing wrong with that, mind! It's all shots and giggles until someone giggles and shoots. Or so the saying goes.
And who will defend BTC's "network effect" from such dilution, other than a few temporary DDoS kiddies? Let the next-in-line currencies trade on MtGox for a time, bitspend bitpay etc. will find no problem accommodating them --- perhaps at some point a "basket currency" evolves? Let's call them "eSDR".
The BTC folks wouldn't like it but the other clones would love it. But none have diplomats, soldiers or bureaucrats behind them as we know ;) and it would be the minimum to at least move those crypto-currencies from "highly volatile hot speculation item" to "desired usage in commercial transactions". Arbitrage might do the rest? After all, intrinsically we know a BitCoin is not 4x as "valuable" as a LiteCoin (or 44x as of right now) but roughly equivalent once they're basketed and arbitraged.
But hey, it's late and my thinking is probably by far not as sound as that of crypto-currency aficionados.
I love the idea in principle, but the world knows:
- those who want a truly hard, non-dilutable unit (for long-term preservation) have a better choice available that will survive whatever trends the next years of techies pop out at an ever-increasing pace.
- and those who want a "soft" unit for mid/short-term transactions (before it can possibly devalue substantially) have a unit that is backed by contract law and your usage of it "defended" by, say, "the world" (if begrugdingly).
Don't get me wrong: I love all the buzz and biz around BTCs these last few years. Truly I'm into what all the aficionados pull off, and whatever winnings they "made". But not sure all "desires of human nature" from a either a transactional-currency/medium-of-exchange or a long-range store-of-value are truly reflected by the thing.
That said, it spawned useful technology even outside the realm of payments, such as http://dot-bit.org/Use_cases
One could argue -- "the world has many fiat currencies in competition, why not the same for digital crypto-currencies"? Hey, that's true! Actually that's pretty neat. But as the LiteCoin example shows, dilution can "evolve" easily. Not a problem as every party choose their currency of choice. But also completely unnecessary, as the whole world could trade&exchange on seashells tomorrow and no-one would be worse off. Different prices for the same products exist throughout the Euro-zone depending on I guess a trazillion of unknown factors, for example, and it works, so no biggie. Cool, let's have a hundred competitors as only a handful of choices will likely gain long-term momentum. And then everything changes with the next big crypto-3.0 thing in 2015 but that don't need to phaze us as long as we cash out beforehand ;D
Hey, come to think of it... this LiteCoin could be something, I should invest! This could be the "EUR" to the "USD", this could still be big! ;P
Is there some objective reason to make bitcoins seem legitimate?
I guess there is the value provided by a decentralized transaction system, but at this point, competition seems like a better idea than picking a winner.
Ah right, because the creation and competition of 100+ other fiat currencies, makes the dollar seem like less of a currency. Executive summary: Bad logic.
If you're interested in obtaining some Litecoin, I've developed an open source exchange. The exchange also issues LTC IOUs on Ripple for those on the bleeding edge. https://bitcointalk.org/index.php?topic=174643
Apply all your arguments 'for' or 'against' Litecoin and apply them to 'Gold' vs. 'Silver'. Imagine if anyone would be willing to accept one versus the other as a 'store of wealth' (gold/silver that is)
In the end, neither has any 'intrinsic value' in the modern age. Sure we can 'make things' out of gold/silver, but we can't eat it or shoot it at each other: making it more or less as worthless. Yet people "expect" that neither will be worthless in a breakdown of society.
In the end it's all human emotion. If Bitcoin is what they say it is ... than why would it care about 'competition' - the gold in the ground doesn't.
> Sure we can 'make things' out of gold/silver, but we can't eat it or shoot it at each other: making it more or less as worthless
Or---priceless! Hoarding them historically never (or hardly ever) interfered with anyone's livelihood or industrial endeavours, yet because of their arbitrary ("useless") nature could "absorb" / proxy per-unit any measure of wealth applicable at a given time and place-----which is another valuable property in addition to the usual "scarce, indestructable-but-divisible etc." list of benefits.
Actually, societal breakdown is where bitcoin doesn't work.
Without communication all chains are forked. And when networked, with vastly different computing ability left over it'd be incredibly easy for the leader to manipulate.
Something like "PrimeCoin" (where the miners are continually finding bigger primes) would be awesome, but we would need to wait a few years between confirmations. Also you have no way of knowing when or where or even IF the next prime number will show it's face.
Mtgox, the most popular Bitcoin exchange site, plans on supporting Litecoin soon[1]. Also interesting is that Litecoin now has a Wikipedia article[2] dedicated to it.
True or not, the word is that Litecoin was created so that people who were bitter about not having been amongst the earliest of the early Bitcoin adopters can have a new chance at a steep value increase. It's not even clear to me that Litecoin is an improvement at all, it just contains certain tweaks.
Bitcoin's mining difficulty is calibrated fine for having a fixed limit. It's the fact that Bitcoin and Litecoin both stop at a fixed amount of units that makes them ultimately deflationary currencies that don't reward spending.
BitCoin is unique in that you can get an exact, real time measure of how the 'economy' is doing, whereas with the American economy these measures are extrapolated based on statistical work. Somebody should fork bitcoin and create a monetary policy adjustment algorithm that responds to changes in the transaction rate and prints more money (i.e., adjusts mining difficulty) in response. They should also remove the fixed ceiling.