Quote from: blueling on June 18, 2011, 03:33:49 PM

I would like to create awareness of an economic effect of BTC mining that will make mining most likely become an near 100% illigal activity in the near future (without governmental intervention). My main point is that mining will become unreasonably expensive for all full-cost paying legal miners (who have to pay for their power consumption).

Here is my bit of theory about BTC mining:

While thinking about rational behavior of BTC users and miners I thought about the fair price of a BTC and how it is tied to the cost of mining a BTC. I realized that the current situation in which it is possible for nearly all enthusiasts to run profitable mining rigs is (probably) a short term market abnormality which is inevitably doomed to disappear soon - completely independent of the BTC price level at the exchanges. I predict the price for mining per BTC (i.e. the costs for electricity (kW/h) that has to be afforded) will in the long-term be higher than the exchange market price that can be earned for selling it - thus for 'normal' people mining will become a money-losing endeuvor. Mining will inevitably become a parasitic (mostly illegal) activity.
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This is true. People will start using their companies computers to mine. However, this will break down quickly, as most computers don't have high-end GPU cards. With just a CPU miner, you can only make a dollar or so a month now. The complexity will be so high in 60 days, that even GPUs won't be able to make much more than a few dollars of bitcoins a month. When your payout is only a few dollars a month, it isn't worth the effort to keep the miner app going.

There have been several rumors that a group called LargeCoin is designing a custom ASIC for hashing. If that works out, the game is over for anyone else. An array of 1000 custom ASIC chips could completely dominate the entire network. When that happens, the group that makes the ASICs can take all of the $100,000 per day of bitcoins generated and keep reinvesting it into more chips until they make the difficulty so high that no one else will ever be able to compete.

Plus ASICs will cost a small fraction of the power of any other solution. The first successful ASIC group will dominate from that point on.