Quote from: taipo on May 21, 2014, 11:36:56 PM

When you're a huge mining operation - and there are hundreds of these operations now, and you have committed millions to an operation that is in effect, depreciating every 12 - 14 days, you do not have much other choice but to expand with every spare cryptocoin you have left - and hope every other player eventually gives in or you yourself will go to the wall.

Mining operations big or small are probably attempting to expand their operations by 15% every 2 weeks to keep up with the rising difficulty, thus leading to a further 15% rise...

Example Mining Operation:
- 100 TH/s,
- 50 x 2 TH/s miners, $5000 USD each, $250,000 hardware investment
- plus hosting costs

At the old difficulty of 10,455,720,138 a mining rig of 100 TH/s would have been minting 4.81 BTC per day on avg. After the latest rise of difficulty ( 11,756,551,917 ) that will drop to something like 4.278 BTC per day. But our fictitious mining operator saw this coming and worked out what that equated to in miners, and ordered another 6 x 2 TH/s miners which will arrive around about the time of the next difficulty rise or just before.

The total fiat value every 14 days for this rig is about $42,000 at the current USD conversion of $640, of which our operator has to turn $30,000 back into their business to keep up with the hashrate and increased hosting costs.

Meanwhile smaller miners that have traditionally made up the bulk of the BTC network, will blink first and drop off, followed shortly by anyone not expanding their rigs to meet the difficulty increases.

Every difficulty jump, the gap between the upgrade cost and total minted coin closes. At some point unless there is a serious improvement in hashrate / kW, those two will come close enough together that these large mining operations will cease expanding to stay ahead of the difficulty rise. Some will fold, others that have financial backers will stay up.

By then they will be the primary producers of hash on the network, and the difficulty factor will peak and stabilise.

You can get a sense of the hardware upgrades by looking at the miner stats for instance at Eligius. Most large operations show a hashrate increase just before or at the same time as the difficulty jumps.