Quote from: teukon on October 15, 2014, 02:44:24 PM

Quote from: justusranvier on October 15, 2014, 12:43:39 PM

Expanding markets attract new entrants into the market, and in the case of Bitcoin mining there is no way for incumbents to exclude competitors who produce valid proof of work.

Expanding markets do attract new entrants in general, but in the case of Bitcoin, it also increases the barrier to entry, because each participant must be capable of handling all Bitcoin transactions. The cost to the network of processing a transaction grows at least as quickly as the number of miners (assuming constant technology for simplicity).

Also, you're right that in a reasonably decentralised environment, large mining companies cannot exclude competitors through voluntary means alone. However, with Bitcoin, there is the 50% threshold to worry about too, something absent in most markets. In a typical free-market, if an entity accumulates more than 50% of the business then they'll keep that monopoly if and only if they continue to outperform their competition. This entity will begin to lose market-share if they even cease to innovate, let alone try to abuse their position. With Bitcoin, there are different incentives involved and a monopolist may well stand to gain from excluding small miners by dropping their blocks.

The costs of entering the market of mining grow with the number of transaction and the hashing power of the network, but there are ways to collaborate that lower the cost of entering in the mining sector (pools).
The pool hub is the only in need to pump out the blocks, the miners do not need a large bandwidth to start mining.

It is true a 51% pool could drop other miners blocks, but it would lose a lot of support from the associated miners if it did so, because it would be detrimental to the health of the network long term.
A large miner could invest heavily and gain the 51% and make an attack (just dropping others blocks), but he would jeopardize its investment in doing so, because it would become the controller and the central point of failure of the network. Essentially it would paint a big target on its back for law enforcement and assorted nasties. I bet, when someone make an investment on the order of $180M (plus assorted ancillary costs) a need a 150 MW power line he consult lawyers about its business plan.