Quote from: murasha on June 26, 2011, 02:36:03 PM

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It's absurd to think difficulty drives price.

Not exacly.
If I all people got something harder that it was yesterday, thay wants mor money for it.
Its about any product, not just bitcoins.
To make supply stay in constant, people need to add more power to the network. They have to smend more resources.

The problem here is you're thinking of bitcoin mining as if it were a real world commodity market - as in, say, oil producers pump out oil and put it on the market where it's bought, used and is gone from the marketplace. Such a market is one-sided. Those who produce it set the price. Occasionally commodities traders muddy the water, but by and large the producer determines the price.

That's not what happens here.

It'd be more appropriate to think of what miners are producing as being like video game / subway / laundry tokens. They have no value themselves. Their worth is determined by what people are willing to accept them for, be it at bitmunchies, silkroad, whatever. For the most part, any bitcoin merchant is basing their price in btc on what they think they can turn around and resell the btc for. At any time, any token holder is free to resell their tokens. The cost of producing the tokens is irrelevant...as is the ~ 400 btc per market being brought on the market every hour. (Yes, ideally it's 300 but at least in recent months it's seemed like miners outpaced the difficulty, averaging 8-9 blocks per hour instead of 6 - if it actually averaged 6, the difficulty wouldn't move)

May not have been the intention behind bitcoin, but that's the way it works today.

There is nothing you can get for bitcoins that you can't get much easier in standard currency...except perhaps if you want the supposed anonymity of shopping at SR. That is why btc has no value in and of itself.

Teej

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