Puppet,
I am starting to think that all BTC mining operations are like a dog chasing its tail in terms of turning a profit. Let's assume that difficulty will go up as you say and that PETA will not make a profit. Do you think that all Bitcoin mining operations will also end up in the same situation?
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I don't mean to encroach on the question posed to Puppet, but I can answer this from experience.
Yes, developing and maintaining a mining operation is a
exactly like a dog chasing its tail. It's a cycle of finding better hardware to temporarily outpace difficulty...which ultimately increases the difficulty...which leads you back to finding more efficient / large quantities of hardware. It doesn't matter how large or how small the farm is, this same cycle will have an effect on all participants in one capacity or another.
This cycle is so vicious that there will be a period of time when only miners with unlimited, free energy will profit.
Heck, it hasn't even been two years since ASICs have been released and we're already pushing into "4th Generation Chips" territory. The product lifecycle we're working with is insane!