Quote from: elggawf on June 30, 2011, 10:41:57 PM

Quote from: ElectricMonk on June 30, 2011, 09:49:54 PM

Not a fallacy. That's why.

Whilst the cost to mine a bitcoin is less than the price to sell one, there will be an incentive for people to start mining. Difficulty and even technological advances are irrelevant.

It's not only true of bitcoin, it's true of gold and very other natural scarce resource that I've looked at so far. Not precisely but certainly the same order of magnitude.

Price of a fish ~= Cost to get that fish on your diner table.

You guys who keep peddling this bullshit theory are disregarding two things:

a) No one who sees fit to "invest" in Bitcoins from an outside perspective really gives a shit about the cost to mine. If they do any sort of research, they might look at the overall hash rate of the network and compare how much it would cost an outside party to attack the network, but I doubt most even do that. They certainly don't give a shit about what kind of ROI you expect on your mining rig;

b) There are always going to be people who mine cheaper than you do. You're thinking that Bitcoins cost $X to mine because your rig cost this much and you're expecting to pay it off over a 6 month period and the difficulty went up so blah blah blah. No one gives a shit. Johnny CollegeStudent just bought a 2x 6870 rig with his grant for college and his dorm room's power is "free" (in his eyes). He doesn't give a shit that you really need a $15+ Bitcoin this week for your ROI plan not to nosedive - he wants a dimebag and he doesn't have a Silk Road account so he's going to sell it for whatever he can get on MtGox.

Your argument might hold water if all miners held the line and no one wanted to drop below a certain figure - you're a fool if you think that's gonna happen. My 5770 is all paid off, so depending on what the market's doing I'm going to mine for whatever I feel comfortable making a profit at (and stop beating the shit out of my brand new, free GPU if it falls below that), and I don't particularly give a shit to hold some line or another - I'm going to take $16.80 today than risk having to take $13 tomorrow, and I'm sure I'm not the only one.

There's no bullshit just facts, mathematics, reason and economics.

If you can make/find/mine for a price cheaper than you can sell then they'll be an incentive for new entrants. Competitive markets have low profits.

Quote from: TonyHoyle on June 30, 2011, 10:10:59 PM

Quote from: ElectricMonk on June 30, 2011, 09:49:54 PM

[Price of a fish ~= Cost to get that fish on your diner table.

I guess you never did economics :p

The price of anything is not related to the cost of production, only the price decided by the market. If you're selling widgets, or fish, or whatever, you sell for whatever people will pay. If they won't pay for your cost of production then that's tough, really... you either take the loss or go and do something else (or run an advertising/rebranding campaign to bring the perceived value up).

If people won't buy your fish for the cost it took you to get it to them then you'll stop fishing because that signals increased supply and/or reduced demand. (N.B. I'm talking all costs here - assets, labour, opportunity, knowledge attainment.) If BTC mining becomes a bigger operation then you can bet that the bulk of those costs will be fuel for the rig and that will be damn close to the BTC price as it is with everything else.

An oz of Gold costs about the amount it takes to get it out of the ground. Same with oil, copper, iPhones, whores, cocaine, apples, oranges, fish, widgets. Similarly, a bitcoin will find its value at about the amount of energy/time/knowledge/opportunity cost that it takes to produce one.

I can't believe that anyone would even dispute this. It's just economic reality. 'Money making machines' don't stay 'money making machines' for long.

PS. I'm not a miner. I bought my BTC.