Quote from: cunicula on August 13, 2011, 05:29:10 AM

Quote from: rbc2012 on August 13, 2011, 02:43:55 AM

>Or to look at it another way bitcoin miners will spend over $11 million dollars this year on electricity, which is 17.6% of bitcoin's market cap.
>In contrast the federal reserve printing budget is ~$650 million or 0.0812% of USD value.

The $11 million is for securing the integrity of the currency not printing.
The Fed may spend ~$650 million on printing but that doesn't include security costs.

How much is spent on...

Continually developing new measures to make the bills hard to counterfeit.
The Secret Service in their effort to stop counterfeiting.
Prosecuting counterfeiters.

What's the cost of counterfeiting that is successful?

Since mining is a true free market the cost to mine will always be dropping as miners seek to maintain or increase profit.
Eventually all miners will have free or near free electricity, the rest having been driven from the market due to their inefficiency.

how much is spent on paper currency is irrelevant. Alternatives to bitcoin with similar security, but next to no electricity expenditure seem feasible. This should be enough to squash bitcoin. I'm just waiting for someone with the requisite skills to do it.

This is what Ben Laurie proposed (http://www.links.org/?p=1183). It is still very vague and has the weak point of needing an 'admission' mechanism, some way for the system to accept new members for the guild of transaction timestamping servers. Some argue that this can never be done in any secure way. But it is important to note that the timestamping servers don't need to know what they are timestamping and thus they don't have big chances to manipulate the market. Their task is very restricted and easy to control.