Friday, January 27, 2023

Ryan X. Charles Ditches Bitcoin for Litecoin, Citing Block Size Issues

Ryan X. Charles Ditches Bitcoin for Litecoin, Citing Block Size Issues

Just days before launch, new micropayment platform announced a surprise shift to using Litecoin, citing an increase in Bitcoin transaction fees as the catalyst. But is the model or the method at the heart of the problem?

Also read: Against All Odds: Is Bitfinex Thriving or Dying in the Months After the Big Hack?

Monetizing Social Media

The brainchild of former Reddit cryptocurrency engineer Ryan X Charles, has been developed with the aim of enabling artists, writers and producers to earn money from their content by incentivizing consumers to pay for it.

To do this, Yours planned to operate a bitcoin micropayment system where “the marginal cost of a transaction on our network is zero, allowing genuine micropayments of one cent or lower.”

This is a potentially transformative application, as the problem of incentivizing consumers to pay for content has long been a thorn in the side of content producers.

Traditional media companies have struggled to successfully adapt to the digital realm, where information flows quickly at generally no cost. The daily newspaper or television bulletin has been made all but obsolete, and Charles points out that the expectation of fast, free content has reduced the quality of what is produced, where even decent content “gets dragged down by spam, trolls, [and] fake news.”

Yours Network Kicks Bitcoin to the Curb

But the monetization issue has also plagued Charles’ target market of independent artists, writers and content producers, as processing payments for small amounts has previously been untenable at a micropayment level. Processors like Paypal control dispute resolution, while Stripe charges a minimum of 30 cents per transaction, making smaller payments unprofitable.

Teaming up with Oxford graduate Clemens Ley, Charles has been working on the Yours project for around 18 months after realizing that using Bitcoin’s ability to transfer value cheaply, quickly and irreversibly could change the content creation industry. Charles noted that Yours is “the first and only group to demonstrate a working routed micropayment on bitcoin.”

However, during the time between inception and the proposed May 30 launch, the cost of sending a bitcoin transaction has increased considerably. This has prompted Charles to make an abrupt about-face and announce that the product will now use Litecoin to enable its micropayment channel due to the cost and congestion of using the Bitcoin network.

Charles made mention of this switch in his Medium post, outlining his reasoning:

Demand for bitcoin transactions has increased and the maximum block size has remained arbitrarily limited to one megabyte.”

Blocks Are Filling Up Fast, and Fees Are Rising

This is certainly true. Since January 2015, Bitcoin’s price has skyrocketed by 1100 percent, while transactions per day has risen from 100 thousand to 350 thousand. These transaction volumes continue to rise, as does adoption, with some reports saying exchanges like Coinbase have on-boarded 400 thousand new users in the last 30 days.

And, as many have warned, the increase in transaction volume has slowed the network down. With the current block size limit of 1MB, Bitcoin has reached a point where it can’t scale much further. Now, people have started sending increasingly large transaction fees just to get their payments confirmed by miners.


Bitcoin transactions

But this begs the question: with such a steep increase in Bitcoin’s price, demand, adoption and transactions, shouldn’t we expect a rise in fees anyway? Bruce Fenton highlighted this point on Twitter:

Some other commentators in the space think that not only is the fee increase expected, but that the problem doesn’t lie with Bitcoin. Instead, the issue is with the prevailing business models.

Twitter user @beautyon_ took Charles to task over the switch:

Switching your business from Bitcoin to Litecoin because the fees are cheaper on Litecoin doesn’t fix the problem, which both coins have.

Won’t the Same Thing Happen to Litecoin?

That tweet alludes to a question worth expanding upon. Although Litecoin has a transaction cost which is next to nothing (meaning that it is currently more efficient than Bitcoin for conducting micropayments), it also does not have the customer base.

So, what if Litecoin suddenly on-boarded a million users? 

Logically, if Litecoin were to see a substantial increase in all metrics, it would also see a sharp increase in transaction fees, just as Bitcoin has.

Complicating the matter is the fact that Charles is an advocate of raising the Bitcoin block size limit. The Yours platform does not need Segwit in order to operate a payment channel, but in the current environment, some have interpreted the shift to Litecoin as politically motivated:

“And you cannot make the Bitcoin network pay for your mistaken business model,” Beautyon continued, “by shifting the cost of your miscalculation into big blocks.”

Whether a move across to Litecoin will help or hinder Yours remains unknown, but in the least it is an exciting, production ready use of payment channels in the cryptocurrency space — most likely the first of many.

Do you think Ryan X. Charles made the right decision? Share your thoughts down below. 

Image via YouTube user “tqualizerman”

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