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Imagine two identical gold mines, mined by two different companies, both offer stock. Mine Co A has a bunch of labourers with pick-axes and donkeys to pull mine carts, Mine Co B has a drill, dynamite, rail engines, and rock crushers. Obviously Mine Co B's stock will be worth more because they will be more efficient.
This may be true in the real world but it's not true in Bitcoin world.It would only be true if the mining companies were allowed to mine as much gold as they wanted, but that is not the case in Bitcoin world, you can only mine a set amount per day.
So what would happen is this:
The mine owner would go to Mine Co A, see they only have labourers with pick-axes and donkeys and so tell them "you guys can go mine on the edge of the mine where the rock is soft and the gold is easy to get to, that way you can still get your 100 nuggets per day
The mine owner would go to Mine Co B, see they have all the best stuff and say " because you guys have all the best stuff i'm sending you deep into the mine to work on the hardest rocks that are tough to get out, so you'll also end up getting 100 nuggets per day.
In Bitcoin world company B would NOT be much more valuable than company A, they would be worth the same amount because they both produce exactly the same amount of gold per day/month/year
I am not involved in mining at all so could be completely wrong BUT from the anecdote above it i would probably have to disagree with Frozenlock. This is because:
A hash rate that goes higher and higher means it's harder and more expensive to mine the nuggets. If companies were having to buy newer, tougher more expensive machinery to mine and the nugget stays at $1 you would hit the point where all companies would go bust because the rising cost of the evolving machinery would mean that no one could make a profit, so the price of the nugget would HAVE to keep increasing so that the companies mining were always able to turn a profit.
or to take Frozenlocks example:
"People go deep to mine gold because it's valuable; gold is not valuable because people have to go deep to mine it."
Actually, if it only cost you $1 to go deep and mine that gold you'd be happy selling it for $5, but if it cost you $10k to go mine that gold would you still sell it for $5? No of course not, the price would be over $10k because you'd still have to turn a profit. In a sense he is right that gold is not valuable because people have to go deep to get it, BUT it's value IS and WILL BE determined on how much it costs you to get deep enough to mine it. If you could go out with a snorkel and grab a pearl you'd be happy to sell it cheap, if you had to buy a super yacht and build one of those funky submarines to grab the pearl would you still sell it as cheap? of course not, the bottom line price of the pearl WOULD be determined by the cost of obtaining it.
If the hashrate goes up and up then it means it's becoming harder and more expensive to mine the bitcoins, which means the price will have to increase.
