Quote from: FLHippy on November 03, 2012, 12:16:14 AM

Quote from: scrybe on November 02, 2012, 06:56:33 PM

These larger and more efficient operations will be motivated by profits, but will likely be more interested in maintaining the network security to ensure bitcoin profits in other endeavors rather than directly from mining itself. I would not be surprised at all if the BitCoin world of 2030 is almost 100% institutional (finanacial houses/banks) mining, with partnering agreements on planned hash levels to help reduce costs, and a big warehouse full of standby gear that can be powered on if a rouge does appear on the network.

You had me up till the concept of miners hevily invested in hardware continuing to mine so that bitcoin continues.... I don't see that happening at all. Just like poeple will sell their GPUs when it's not profitable to mine, those who bought into ASIC expecting profits will shut down when there are none also.

I'm shutting down and selling my GPUs tuesday, maybe wednesday.

ONLY in the case where there is another revenue stream that is directly supported by their continued unprofitable participation in bitcoin mining.

For example, thinking like a multinational bank, it might make millions or billions of dollars a year on fees related to bitcoin utilization, so they can factor that into the overall P%L sheet with both departments included. So while the mining department is like IT (sucking in money and turning it into heat (disclaimer, I work in IT)) at a loss of $4m a year, and you get $44m a year in fees, then you are $40M in the black, and you know that you have enough capacity (5% for a really big bank?) to prevent a double-spend attempt from any of your evil competitors, or ensure that your transactions are confirmed within a certain timeframe without excessive fees. Who cares if the mining is a losing proposition when you are making 10 times as much overall!

I'm not thinking that this makes sense for anyone who does not have something like "maintain X significant percentage of hashrate" as a key component to some other business plan. So independent miners are likely to have to run extremely lean, and it might not even ROI out if you have free power if the big boys start throwing their weight around. It's also not likely to stay that way permanently, the appetite for the loss leader status will run out and they will figure out a way to reduce hashing closer to parity, but it could impact us for several quarters if it happens.

I do think it will overall hit an equilibrium with a modest (5-15%) profit as time goes on, but in the start up phase we are going to see a lot of weird shit as we hit more diverse and larger markets. I'm hoping for at least a couple years before mining gets strange in some way, guessing maybe 5 at the outside.