I would like to create awareness of an economic effect that will make BTC mining in general an illigal activity. In short: Mining will become too expensive for full-cost paying 'legal' miners (who pay for their power consumption). But this is not going to stop parasite-miners who will crowd them out...

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 all enthusiasts to run (seemingly) profitable mining rigs is 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.

The reason for this is quite simple: Whenever the market price for one BTC is higher than the mining cost it will motivate people to participate in mining thereby making the mining task more difficult for all miners. At first I thought this would allow profitable mining only up to the point where the running costs for mining stay below the market price. But then I realized that today there are two completely different groups involved in mining: the full-cost paying 'legal' miners and on the other hand the 'illegal' parasitic miners who use secretly computers in public organizations (universities, youth centers etc.) or privat companies. The big difference between those two groups is that the latter does not have to pay for their power consumption what makes mining attractive for them even when the actual costs for the host organisation owning the machines would be prohibitive.

In the BTC mining business the costs for electric power will dominate everything. At first rational miners in regions with the highest energy prices will be squeezed out by miners in regions with lower costs. But finally as the parasite group keeps growing it will eventually make legal mining too expensive .. even for the lowest non-zero energy cost payers.

In the end all mining activity could be performed by illegal/parasitic miners. While the price for one BTC will be higher the price for mining a new one. It is a simple crowding-out effect that places in if the number of parasitic computing power keeps increasing - the parasites are the only ones who keep making profits even when their hosting organization has much higher than break-even expenses.

I wonder whether this has been discussed before and if it could become one of the major points of critique in the public debate (beside the money laundering thing of course). One of the good things about the parasitic BTC mining is that it may act as a support for the BTC value - because everybody then knows that a substantial amount of money had been stolen/sucked out of some business entity for mining the BTCs.

(Due to the high number of posts I am not 100% sure whether this topic has been addressed before - if it has, please let me know the thread uri.)

/blueling