Quote from: ptmhd on May 19, 2011, 05:08:59 PM

Quote from: Tukotih on May 19, 2011, 02:18:52 PM

The price is tied to difficulty and overall network hashrate.
If network hashrate increases more than difficulty then price will go down.

In which case the price for 1 BTC will be alot higher the day difficulty gets so high that mining is no longer profitable.

I'm not 100% sure if I've gotten the system right though. Can someone prove me wrong?

i don't know how to prove you wrong but difficulty & hash rate represent costs of mining for new coins.
which should not misunderstood as value. especially value of all coins.

the fact that anybody spend meat space money for hardware, electricity and bandwidth
can not be simply interpreted as an equation between costs and exchange rate.

it is a matter of demand and supply at what price level the trade happens.
you can spend bazilions of kuna to buy & operate mining equipment but if no one wants to buy
you either keep the coins or sell at what is offered. no one cares what did you spend on mining
price follows difficulty because of people willing to help mint coins and add power to the hashing
network because they can profit from this activity.

if there would be no influx of new money through exchanges, the price would be still in a 10 cents limbo
i thing that greed is leading, followed by difficulty. price is irrelevant.

His point is that mining is the only source of inflation in the system. If the network hashrate increases a lot compared to difficulty, let's say 12 blocks an hour instead of 6, then for the time, until the difficulty adjusts, the supply of Bitcoin will increase.

The point about mining being only 20% of the total market is irrelevant. It is the only inflationary component to the market, so it is the only one that naturally reduces price.