Post
Topic
Board Bitcoin Discussion
Re: bitcoin is failing in replacing fiat in physical shops
by
augustocroppo
on 20/02/2014, 17:00:56 UTC
No one in his sane mind will devote "mining" for the sake of the Bitcoin network. It is a cost intensive operation and without a prospect of profit it is meaningless.
They will get the mining revenue. If you accept that some people will mine for profit, surely it makes sense that others will mine for profit and to help secure the network?

The only purpose of "mining" is to earn BTC. Help and secure the network is just a consequence of this purpose. Therefore you are right, everyone which "mine" could help the network. However, it is not the number of "miners" which have an impact on the security, but the hash rate which one controls to compete with each other. When business compete with each other, they will have to manage costs to operate the "mining" equipment. The whole operation is a liability and thus the need to be compensated with revenue. To increase revenue the "miner" will have to sell BTC in a volatile exchange market. However, as more "miners" compete with each other, more the liability increases. To increase the revenue, the "miner" will have to buy more equipment. But more equipment, more liability. The revenue generated by the equipment do not depend on the BTC obtained, but in how much it worth in the exchange markets. So as long the price of BTC in fiat money increases in proportion with the generated BTC, the liability could cover the revenue. If the liability is not compensated by the revenue, then game over. That is not good business.

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Moreover, others are already in control of a big chunk of the network. So "mining" is not going to mitigate any risk because the final cost for the sellers are going to be higher than the expected benefit.
The more honest people mine, the harder it is for dishonest people to get a significant fraction of the network. I think (and hope) we'll return to the original vision of a large number of miners, each with a small fraction of the network; but instead of the myriad miners being fan boys early adopters running mining rigs in their bedrooms, they will be corporations and governments. And this will happen because as those corporations and governments increasingly depend on Bitcoin, they will also look into mining and see it as a strategic need as well as a potential profit centre and good public relations.

"Mining" has nothing to do with honesty but with money. The idea that people are "mining" because they are honest is ludicrous. Whatever entity decides to "mine" to secure the network will have to be ready to afford high levels of liability in their books.