The entire "limit" issue is perhaps best addressed
here. There's really no need for clones.
, no. Bitcoin can function alone now, but multiple independent systems in the same class are capable of amplifying the overall effect.
There may also be growing realization that trading BTC/LTC or BTC/XRP is preferable to BTC/USD or any other fiat denomination. There is arguably greater risk in having exposure of any kind to the traditional financial system, and remaining in the crypto environment is much faster for many activities.
Individuals who feel comfortable with relatively concentrated transaction processing power should have no problem with Bitcoin. Those who do not may prefer Litecoin, Ripple, or any other variant that might gain traction.
SatoshiDice would cripple and probably destroy any chain incapable of sustaining itself, while acting as a rite-of-passage for those that can pass muster; the stronger a source of revenue, the better.
I can see how multiple independent cryptocurrencies add value to the whole cryptocurrency revolution by being more resilient overall. However, since the value of a cryptocurrency comes mostly from the network effect I think it is correct to say that altcoins also reduce the value of bitcoin by taking energy, capital and users away. A positive and a negative equal zero.
I think it all comes down to, are these altcoins here to stay? If yes, then it makes sense to offer gambling in them, if they will die, it's a waste of energy.
As Sunakar noted empirical evidence is that LTC for example is growing in value and hashrate. However, this is only due to speculation. Nothing wrong with that, bitcoin started the same way, but speculators can be wrong too. So I think it makes sense to wait another cycle to see whether any altcoins survive a downturn and renewed pessimist sentiment towards cryptocurrencies. Bitcoin proved it survived, but will they?
I'm confused about the limits of bitcoin when it comes to amount of transactions. From the discussion about the blocksize limit it looks like many believe that 1 decentralized cryptocurrency will never be able to support the current amount of banking transactions (and thus will need to become a large transactions only currency). But is that true? I would think that the exponential growth of personal computer power, can keep up with the exponential growth of amount of transactions?