Mining is extremely important and core to Bitcoin. Let me try to describe some of the desirable characteristics of Bitcoin mining, which are often overlooked:
- Miners are always hashing, using significant real world resources, 24 hours and day, 365 days a year
- Miners always ensure they are working on the block which they think is in their own financial interest and are constantly evaluating which block to mine on
- Miners can change their mind about which block to mine on anytime they like and are therefore always contributing the determination of the longest chain
There is significant potential for weaknesses in mining incentives which could adversely impact some of the desirable characteristics of mining. In order for miners to keep doing the above, they need to be incentivised. Mining is crucial for determining the longest chain.
We need most of the planet's double-sha256 capability devoted to Bitcoin mining instead of doing something else.
As long as that condition holds, the actual hash rate isn't very important.
Maybe this is right, but even if most of the worlds hash rate is devoted to Bitcoin mining as there are not many other uses, if miners cannot make contributions to their marginal costs, why would they care that they help build the longest chain?
I appreciate I could be wrong here, maybe I have too much of a short time mindset when assessing Bitcoin game theory. As Mike Hearn recently said "Miners are not incentivised to earn the most money in the next block possible. They are incentivised to maximise their return on investment" [in the long run].