Quote from: jayeeyee on June 16, 2013, 06:25:51 AM

Why can't we all just agree on one thing for a change? Tongue

I didn't expect my topic to get this deep into discussion. I was merely shouting the obvious.

Because weather or not you say they're related, you're wrong... it's splitting hairs really. To call your opinion obvious makes me question your ability to think critically.

I think everyone (at least here on these forums) is well enough aware that the price isn't some sort of specific function of difficulty... they're independent systems, but they're extremely ~~codependent~~ correlated... The gold reference is a really good example that is often misconstrued.

There is only a fixed amount of gold on the planet (like BTC)
Mining techniques and technology limit the ~~availability~~ speed at which we acquire gold.

Bitcoin has some significant advantages over gold, as a form of currency, rather than stored value. While large mining farms can be hooked up, just like large real-life mines... nobody can (at this point anyway) lay claim to large veins of gold, and use fences/laws/guns to protect it while they take their sweet time digigng it up. To use a really shitty minecraft reference, it's no more or less likely that you or I find a block with the same tool... what matters is the tools.

People would not develop ASIC's if they didn't think they'd get a return on their development. The real geniuses here are the ones selling the asic's for prices that may and/or may not warrant an equal return in BTC... it keeps the idea of buying one tantalizing and so many of us are driven to take big risks for big rewards. To my knowledge, none of the ASIC companies have really revealed the costs involved (which are probably quite large, I am sure) so there is really no way for us to know (aside from speculate) about their profit margins... for all wee know every BFL rig could be turning a 500% profit margin over the R&D and production costs. If they slashed their prices in half, we too might see returns in bitcoin. On the flip side, slashed prices means that the demand for them would be higher, thus they would have to produce more, which would in turn lower their profit margins.

Why is all of this related to difficulty? Because the only reason people even fathomed developing ASIC's in the first place was in attempt to combat the rising difficulty. You can't apply conventional economics to a system that strives and is built from the ground up to be absolutely nothing like a conventional economy.... what's beautiful about the price/difficulty ratio is this:

Bitcoin price reacts to difficulty, and mining difficulty reacts to price.

Since they are both reactionary (for a lot of reasons I won't bore you with listing here) you can see that in the long term and independent of large central authorities (exchanges/online wallet services, which I hope eventually die off) it means the relative value of BTC to physical fiat will keep going up until we've reached near the end of our mining period.