I'm not a fan of arm-chair economics, but only time will tell if they pan out. A bank selling at whatever as a loss-leader is completely different from an individual middle-class homeowner, if you were replying to the comment which you quoted. Apples and oranges.

By what reasoning do you come to this conclusion? Assuming at some point in the future, there is little to no demand for ASICs (as with GPUs / FPGAs now), they are losing what exactly by mining?



I'll break this one up because I'm losing track as well, and it's good to segregate points.
I believe you are saying that the sellers will keep reducing their sales margin until they are selling the units at parity with their costs? I don't ever see that happening, and I don't think there are any precedents for it happening in other products, so I'm not sure why it would happen here. Without a healthy margin of profit, a company cannot pay its' overhead (employees, lights, rental space, etc.) and other fixed costs, what would be their incentive to slash their own throats?
As to mining day 1, you forget the not-insignificant development costs that I mentioned in a previous post. It has been estimated in the hundreds of thousands to millions to develop an ASIC mask, and have a fabricator actually spend the time to produce it (fab time is not at all cheap). Lacking serious VC interest as you argue, the clever scheme would be to develop as much as you can on your own dime, announce the development of the project, and take pre-orders at a price point to cover these costs, which is perhaps exactly what happened (as mentioned in my first version that I restated). Breaking even, or profiting to the point where you no longer need further orders to pay for future orders then places you in a position to switch your business model from pain-in-the-ass vendor, to easy-money miner, and this can likely be done long long long before slashing prices to parity with cost. In fact, it may have already be near or at that point, but that is pure speculation.

The incentive the other way is fairly clear though, roughly $72,000 US fiat are generated via mining every day, any significant portion of that is a prize worth keeping in mind (imagine taking a 20% stake, you suddenly are generating $432,000 USD/month). With the halving of the generation rate, this will change in a way we can't predict, but most speculation reads towards the positive on coin pricing, so I imagine people feeling bullish about the future prospects as well.



Again, I disagree. I will give anecdotal evidence, since I don't have any science to give. When you talk about the future, everything is unknowable, that's just how it is. You make models, and forecasts, but until it happens, you're just guessing. People make models and forecasts about bitcoin, and you might argue the merits of the source, but it's really the same as any other venture.
Case in point, a friend worked for a startup that was developing tiny modular programmable interlinked wireless "things" (called motes). This was a UCBerkeley CS grad students thesis, which he patented, and then marketed to a team of VCs who invested millions. The product was new, untested, unproven. There was no existing market for them, and while the potential existed for them to take off in a huge way as a breakthrough technology, there was absolutely no way to know whether they would ever sell product 1.
The risk was total loss of all money spent as salary, marketing, and other non-recoupable assets (things that couldn't be sold off), and it was as likely to happen as it was likely for the technology to be the next big thing. I don't know what models and forecasts they used or were sold, but they were all wrong (the product and company failed to deliver and ended up on the chopping block). I'm not sure where you get the sense that serial investors have some method of picking sure-fire things, or managing risk in some way that is better than anyone else. But again from my experience, they know that they are getting talked up about a number of projects, pick the ones that sound the best and let fly knowing that the few big things make up for the rest of the failures.

I would recommend reading http://www.inc.com/cindy-padnos/insiders-guide-to-silicon-valley-investing-venture-capital.html


Expecting 80% failure rate is the exact opposite of your statement. I can't really be any clearer on this point, so we will have to either agree to disagree, or find the point of confusion where we are talking about different things.
I will say that I am not expecting super-angels to want to invest in bitcoin at this point, it's too small, but that no one would ever want to sink bucks into bitcoin? No, I don't buy that.



See above, I guess I should have included this part into my response. Sorry.


While mathematically the two are doing the same on a practical human level it's really not sensible to say that the average human being will be happy spending time and energy making sure their machine is up and running 24/7, checking that their wallet is working and accruing as it should be, getting on an exchange and converting to fiat for the equivalent amount of money a day that most people probably lose between their carseats after buying a drive-thru fast food meal. I just don't see it as likely that people are really that interested in pennies as dollars, but perhaps that's just my slanted view.

I hope I'm presenting these ideas in a concise clear manner, and don't come off too abrasive, in an idea slinging thread.

Sorry I'm not going to respond line by line, simply because it's somewhat long and I just wrote out a long post. Laziness is my curse.

I will try to go in order though.
-- I will start by saying that I know personally, and have contact with many other through secondary means, VCs. I will first admit that they likely come in many flavors, but that from my experience it is completely 100% false that the first concern of a VC is that they not lose any money. In fact, most of the VCs with serious money, know 100% for sure that almost every investment they make will lose money. BUT, they look for things that have the promise to make a big return, because when you have a lot of money, and you invest in 100 risky things, if 95 of them fail and you lose some/most/all your investment (rarely is it all or even most, usually just some) but 5 take off in a huge way, you've made way more than you've lost.This isn't to say that they are blase with their money, they keep tight control and strict track of it, but they do not invest only in surefire things (because there are no such things).
There may be some that do not operate by this principal, but this has been my experience, so I can verify that there are at least some (and I would venture as far as to say many) who do.

-- Admittedly the lack of patent or whathaveyou would be a deterrent to investment, from a Venture Capitalist perspective, I agree. In that regard I will admit that the interconnectedness is a barrier to large-scale investment directly in mining. It is not insurmountable however, many people invest heavily into obtaining portions (shares of stock for example) of successful money making ventures, without being able to monopolize it. In fact, this is more often the case than it is not (very few companies, such a Berkshire actively seek full control of the companies they invest in). This merely reflects the various types of investor out there, and furthers the idea that while not all investors would be interested, some could be.
To further this point, there have already been a number of successful "startup companies" in the mining world, where a manager by taking investment and issuing shares of stock, would set up, maintain, and run a mining farm, and the shareholders would receive voting rights, and dividends (in the form of bitcoins). This has been done on the small scale, there is no reason it can not scale up.

-- I will forego the diamond point, as it is simply an analogy, and as all analogies go, flawed. It holds a grain of truth though.

-- I agree that no one knows how high and how far the difficulty spike will go, but that has always been true. It was true at the time of GPU minings beginning, it was true during the price bubble, it was true after the price bubble burst. In fact everything about bitcoin has always been unknown and in many ways, unknowable until it was there. I don't see why that is a barrier to centralization. Those who see things in an optimistic light (which you inevitably must have done to invest in 200+ GPUs), are unlikely to become huge pessimists, simply because the name has changed from GPU to ASIC. I don't see uncertainty as big a factor as you do, but I might be overestimating peoples risk-profiles certainly.
If we have a disconnect about what we mean by centralization, well there I don't really know what the future would bring. To me it seems unlikely that those with only the tiniest pinky-tip in the mining world will want to spend $150 on a box that will take up 2 USB ports, and return less bitcoin than a similarly priced GPU would today, but there may be more people interested in the ease of plugging in a magic BTC box to their computer than I think.

EDIT: See above post for numbers, and thread, but I already see one customer who has confirmed himself for 4 Minirigs (4x30000 = $120,000), multiple orders of 2 ($64,000), and probably more unaccounted for. And these orders account for a huge majority of the expected hashing power to come online. As I suspected, people not as risk-averse as you might think.
Also we have something like 64,000 GPUs on the network right now (I don't know amongst how many hands that's in of course), and we see a pre-order count of under 1,000 to the largest manufacturer, and potentially under 2,500 total. That's a huge decrease in the number of miners it seems.

-- As to why I foresee a go big or go home mentality, it is for precisely the uncertainty you mention, by looking at worst case scenario. The earlier you enter with the greatest amount of bang for your buck, the longer you can stay in the game if others are doing the same thing. Some OTC calculations to represent what I mean:


Let's call the current network 1,000 HashingUnits. We have 2 hypothetical buyers, Big and Small. Big buys 100 HashingUnits, small buys 1 (these are both relatively large in comparison to todays actual network, but they are useful for round numbering). ASICs begin shipping, and they both receive their units when the network is at 9,899HashingUnits, they come online and the network is at 10,000HashingUnits, with Large controlling 1% and small controlling .01%. Over the next 3 months, the network increases steadily to 20,000HashingUnits (111HashingUnits coming online per day). Both large and small have recouped their money at this point, and control .5% and .005% respectively. They see the network has doubled, and they are making half what they were making before, and want to double up. Large buys 100HashingUnits small buys 1. They receive it when the network is at 20,555HashingUnits, come online and the network is at 20,656Hashing Units, controlling .97% and .0097% respectively. Spurred on by good ROI everyone else does the same, and after 3 months, the network is at 40,000HashingUnits (214HU coming online per day), .5% and .005% again. Neither one wants to invest as much as it would cost to double up again, and just sit on their investments.

After 3 months, the network is at 80,000HU, Large controls .25% (~$90 / day @ $10/coin), small controls .0025% (~$0.90/day). 3months later, 160,000HU, Large @ $45/day, small $0.45/day, at some point the returns are going to be so insignificant that small might feel that while it takes up a small amount of space, and a little bit of power, with little to no noise, it still is pointless to keep running, while large, with some more hassle and maintenance is still making a very significant return even after the network has increased its hashing rate 16x from where he started.

An extreme scenario to be sure, but illustrative of why in some ways if you are worried about huge jumps in the network, being a small time dabbler might feel pointless. Others might not, but that's where I was coming from in terms of go-big or go-home. I don't anticipate such a dire scenario, but it is certainly possible.

I don't see why "Market Forces" would counter-act the proposed action that meow mentioned, which I will restate so that you can elaborate:

1) ASIC sellers create hardware
2) Buyers buy up ASICs
3) Difficulty reaches a point where demand begins to dry up for ASIC hardware (ROIs become less attractive)
4) ASIC sellers now sitting on money, fabrication equipment and connections, an established design specification no one else has (except by reverse engineering), and little to no demand for their product begin to produce ASICs at cost and mine with them.

Where is the profit to be made for a new company to enter the market, invest in creating and designing an SHA-256 hashing ASIC (an expensive and time consuming project), contract fabrication and construction, for sale at slim profit per unit, when demand, already at a low to begin with, decreases even further with the increasing difficulty due to existing manufacturers bringing heavy hashing power into the network? If anything "market forces" would only drive said new company to enter the ASIC busines to mass-produce ASICs for themselves, not for resale, marginally reducing centralization, but not by much.

I agree that super-centralization of hashing power will in essence, destroy bitcoin, but from a business perspective, where is the invisible force that would stop that? As you said, if there is a profit to be made, a company will attempt to make it.

As for jalapenos, how are those different from the existing casual GPU miners? We will be looking at a network of some 200-250TH in the next 2 or 3 months, if the shipping dates from the major suppliers prove correct, and could easily hit 500TH by next year. A 4.5GH/sec box would be roughly the equivalent of a single very low-power video card (like a 6770) in todays GPU network (for the 250TH scenario after the halving), still requires a computer to be up and running for power, 2 USB connections (so more than 1 and you will be daisy chaining power USB hubs), and communication to the network like a GPU, and it can be used for nothing else. If someone is not interested in running a linux box 24/7 in some out of the way place, why would this technophobe suddenly be on-board with this relatively expensive (the price of a decent GPU) mystery box that occasionally makes them a fraction of a coin (roughly 1 coin per week of 24/7 uptime)?

And again, when I talk about centralization I don't mean that no one anywhere would be mining on a small scale, but simply that the contribution from the small timers would become less and less of the whole pie. Some numbers to play with (hypotheticals):
Each jalapeno would be roughly 0.0018% of the total network @ 250TH, requiring ~555 Jalapenos for every 1% of the total hashing power.
If we were to split the network in twain, 50% Casuals on Jalapenos, and 50% "Farmers" on Singles this would require ~28,000 jalapenos, at a cost of $150 each ($4,166,666 total) and 2100 Singles, at a cost of $1299 each ($2,800,000 total). You can already see a huge centralization in this fairly generous estimation, 7% of miners control 50% of the hashing power, with only the most modest of investments (this assumes $1299 per "Farmer"). I expect that it will be in fact far more skewed than this in fact, as for every person who buys multiple jalapenos, others will be buying even more singles / minirigs.

EDIT: To add some reality to my fanciful numbers, I will use the pre-order list of confirmed orders for BFL from https://bitcointalk.org/index.php?topic=89685.0
Orders:
Jalapeno SC               209
Mini Single SC              12
Single SC                  253
Mini Rig SC                  24

TH:
Jalepeno SC           0.9405
Mini Single SC            0.36
Single SC                15.18
Mini Rig SC                  36

Minirigs make up 5% of the orders and already control 70% of the projected hashing power, by order list. Jalapenos make up 40% of the orders and less than 2% of the total hashing power. This list is clearly not comprehensive, but it shows the trend fairly clearly.

I agree completely, and I can't really think of a good rebuttal as to why they wouldn't or even shouldn't do so. A massive pre-order sell-off of their prototype units to cover the development costs of ASIC miners, basically gives them free (or at profit) closed in-house ASIC designs, and contacts in major Fab plants that see them as good money filled customers that they are happy to continue to lend machine time to, and a suite of paid-off production equipment to create the rest of the architecture. They can then produce virtually unlimited amounts of product at-cost (which could be waaaaaaaaaay below what people are paying now) to put on the network. Why wouldn't you do that?

I can only hope that the delays between ramping up production to meet demand, and the tapering off of demand to producing machines for use by the producers is significant enough for the miners to pay off most or all of their purchase, and leave them incentive to keep mining, rather than just give up when confronted with a huge unexpected difficulty spike.

One possibility, is that with continuing interest in ASICs, improvements to the architecture can both reduce cost and increase efficiency/power, creating a continual demand for new and improved ASICs, which would delay or negate the manufacturers switch from supply to mining.

As you said, we'll see...

Perhaps you were expecting a more debate oriented back and forth, I dunno. That's not what I'm here for, but I can oblige just so there are no loose ends, then we can be done.


You make no definition for "long time". Is 1 day a long time to you, or is 1 year a long time? No one knows what ROI will be, but the most likely scenarios projected by existing supply is 6 months, assuming price remains relatively stable. This is the same ROI most people figure for GPU purchases. So why this is a point of contention is beyond me. You can check this thread and others for calculations of TH coming online from ASICs in the near future to see if you agree with this or not, that is a separate discussion.


"This eventuality" = Breaking even? Not sure what that even means.
The stale argument for buying coins rather than mining has been refuted ad nauseum, but we can go over it again. Buy coins, price goes down, you lose money. Buy coins, price stays the same, you have coins to either spend or enjoy holding. Buy coins, price goes up, you made a little profit, now you choose to sell or hold and hope for more up, speculation rules the day.
Mine coins, price goes down, mine more coins to break even / profit. Mine coins, price stays the same, reach 0 and begin to profit. Mine coins, price goes up, ROI shortened, profit sooner.
So great, both scenarios carry risk, both provide reward, there is no reason why one is superior to another that you've given. Seems a pointless discussion, given that people are interested at some level by mining, rather than trading.


Addressed the bulk of this above, as you've just restated the point I had no interest in responding to before, as it carries little merit. The only thing I can add to this is that speculative trading on the short term, day-to-day or weekly swings is far riskier than mining. It would make more sense to warn people about the risks of day-trading, than to warn them against mining and suggest they participate in day-trading.



I'm not sure I follow this one either. This is different because...? None of what follows supports this argument.
What are the logistical barriers to entry with GPU mining? Having a delivery man deliver your GPU? Putting it into the motherboard? There exists an extensive and well-established system crafted specifically to facilitate the creation, purchase and delivery of GPUs. Unless you are using logistics in some sense I'm not aware of. The technical barriers are not particularly significant either, you need to be basically computer literate, but if you are at the entry level of generating crypto-currency, I imagine you meet this requirement or can quickly do so.
If you are referring to large scale farms of scores of GPUs (which you completely fail to mention), then I suppose I can understand your statement as to difficulty, creating the infrastructure to support this is quite difficult, and this falls directly under my story about the overzealous GPU miner. Since this has been directly addressed I will not go into it further.

As to the second part, ASICs, since they require less time, space and power, that would all seem to suggest that it would REDUCE the difficulty of setting up a small, medium, or large sized mining farm. What is your point then? The difference between then and now is that it is easier to do now? This part makes little to no sense in context of "barrier to entry". Perhaps you mistyped something.

The limitation of availability makes them less available, I again don't see what that has to do with people overzealously purchasing them, or why they should rethink mining because of this. The only way this is a different situation than the limited availability of GPU hardware post bubble is that instead of people paying over inflated prices for second hand hardware in a desperate attempt to get anything is that they will be blocked from purchasing any units at all. This in fact helps protect people with $$ signs in their eyes. Not sure why that is a negative factor again.

Delay of shipping is probably the only point worth addressing, as it is slightly different from the GPU situation, and I suppose deserves some thought for people. Those who are getting in early will reap huge rewards compared to those who get in later. If those who reaped early rewards rebuy in with those profits, it can suppress the expected return for later miners I suppose. However looking at the confirmation of early orders, the TH are spread amongst jalapenos and singles, such that it's clearly small time miners, who are not turning 1 minirig into 2 into 4 into 8, etc., driving difficulty into untouchable regions. Difficulty is likely to peg at around 33mil by the time people who order today receive their rigs, and will not do anything crazy like double in the following few months. ROI is always unknown, but it should be estimable.


I believe I addressed all your points, I hope this has assuaged whatever hurt you've accrued at being ignored. I'm not terribly interested in a reply, so we can end this here, as neither of us seems to feel that the other has provided any salient points of contention. Best of luck to you in your endeavors, see you around the forums.

Why even bother with the stock market and money, sink all your currency into some raw material and try to barter it for some other valuable resource.

I seem to be stepping on a lot of easily offended toes in this thread for some reason. If you can show me where I said the US is the only contributor to bitcoin I'll be happy to apologize, otherwise I'll just have to raise an eyebrow at a somewhat unprovoked response.

That said, the US is clearly by far and away the greatest component of the current network. If the power went out in the US, the network hash rate would almost certainly fall to a level that would bring bitcoin transactions to a screeching halt until it resumed. Just how it is, if you're in another country and feel slighted by that, get some friends going on bitcoin I guess.

Agreed. But to be fair, one must consider what that lifespan might reasonably be. I have an old Antec something or other from 1995(ish) sitting my room, that still works, but I would never use it, nor could I, as it has like 50% of the wattage delivered on the 3.3V and 5V lines. I suspect most PSUs will outlive your use for it either way, and it can even be a blessing for hardware to die if you have some weird crazy OCD about usable hardware (like me , I have piles of "working" but worthless old hardware).

As someone not actively involved in the whole FPGA / ASIC world, except on a cursory level, I might interject that I find all this bickering and whatnot most distasteful and reflects poorly on all parties.

As potentially the biggest business venture related directly to bitcoin to date, that's a shame.

Most quality PSUs are rated to run continuously at their full labelled power. Many reviewers even use hotbox torture chambers to verify stability of PSUs at full and even over-load.

If you plan to run a PSU near or at it's label, get a quality PSU, and don't worry about rules of thumb.

Thanks, that's certainly a good start outline! Much appreciated.

 So I guess there's no one out there who has been compiling a timeline, too bad, I think that'd be good for the community. People might learn from all this

I would expect that they would use USB2.0, as it is far more standard and common, there is no need for the high throughput of USB3.0 for ASICs, and only the Jalapeños will we possible to power from the USB ports alone (and you can do that with 2 2.0 ports).

I apologize if this post sounds lazy, but I was wondering if there anywhere a good condensed read of the major bullet point events of Bitcoin, or even just the major scandals and whatnot.

For example, GLBSE I'm reading in another forum was recently taken down due to some sort of issue? And SR keeps going up and down and all around. There have been a few ponzi schemes that have taken users for a ride (not sure of the names), ASICs are the hot new hype, and so on.

I've been out of bitcoin for about a year, and as my interest returns, I find I'm quite behind on many things.

Thanks in advance

I'm not sure you read my post either. Do you know what historical precedent means?

You make points that I address as having already been made, and as such do not require or deserve a specific response. If I need to explain the wheel every time, then I will never get to anything beyond the wheel.

It's fine though, I do not have any specific agenda to explain to you in particular. I merely present information in general, and was utilizing your post as an example. The general concept that I suppose you are unable to wrap your head around, but which I will reiterate for any subsequent reads is simply this: We've experienced a situation very similar to the upcoming switch to ASIC mining before. The losers were those who were unnecessarily bearish and bullish. The winners were those who moved forward in an optimistic, but considered manner.
That would be my advice were you to consider entering or continuing in the world of bitcoin for profit. If you have other reasons, that is entirely separate.

I'm not sure what you would like addressed, I told you that I disagreed with your statement and why, using historical examples. I suppose if you have no rebuttal that is fine, but you don't need to make a big deal about it. Sorry if I hurt your feelings by disagreeing.

I am not misconstruing your post at all. That line is the exact same that I heard during the GPU wars. "If you want to make money then you should just buy bitcoins directly than to invest in [GPUs]".

I disagree about the situation, this is patently similar. I am in fact talking about the time AFTER the bubble burst, there was a big rush after GPU mining became an option, the network expanded like crazy, price was driven up by speculators in a pump and dump, and then cruelly crashed the market. After that point, many folks said "bitcoin is done", "dont ever invest in a single additional GPU, you'll NEVER see your money back", and so on. There were similar problems, 6xxx series GPUs were freshly out and carrying a premium price tag (and low relative hashing power), 5xxx series GPUs had been on the market for some time and were increasingly rare and hard to find. 5870s / 5970s, *the* primo card (and the only one I would have mined on), were almost impossible to find, with long delays in searching them out, delivery from unreliable buyers, etc.


In fact, in mirrors the situation quite well, except that the addage of "always being able to resell the GPUs" is no longer true, so your risk is greater in the sense that you could be stuck with a useless hunk of hardware that you can't even enjoy games on if things go really sour. But caveat emptor. I'm not saying buy or don't buy, but consider your actions prudently. It's not as good or bad as either side makes it seem.

One thing I don't like about this forum is that there are too many childboards. I remember the general tenor of a post but not enough specifics to track it down for reference. So you will have to take on faith that I'm not just making up what I say (while I will admit that I am spitballing numbers).

Anyway, I disagree. and see centralization as an inevitability. I'll start with your points and see where that leads me.

1) To say that the interconnectedness of supply will preclude a product from attracting serious investment is, well, I'll say flawed. Serious investment follows potential for serious ROI, nothing else. If USBTC skyrocketed to 10000USBTC and stayed there, you think that no one with serious bucks would attempt to capitalize on that? One might even go so far as to say that the potential for monopolizing a resource would be an attractive quality (companies love monopolies), in a high demand item. Look at diamonds, there is a glut of them, but only a very few people control the entire supply, and by dribbling out that supply, artificially inflate the price, reaping huge profits. However this is mostly irrelevant as BTC is not of the scale to worry about serious VCs (although there are supposedly VCs backing the asic makers, so...)

2) Those who will be buying "massive amounts of ASICs", being a relative term already, are likely the ones who own a "massive amount of GPUs". If you've been ticking along with a 70+GH/sec GPU farm, pulling in bitcoins, you have 2 choices: a) shutdown, throw away all your old GPUs and move on with your life. b) re-up in ASICs. [this same choice applies to hobbyists, though their response will likely be the opposite]
2.1) I would argue that choice b is more attractive precisely for the opposite reason that you suggested. Overhead costs are reduced on the order of 1000%. The fact that anyone bought an FPGA at all shows the power of overhead reduction. The $/MHash of an FPGA is vastly inferior to a GPU, extending the time for ROI. The only benefit is lower overhead. ASICs are vastly superior even to FPGAs in terms of MHash/Watt, reducing overhead that much further. Someone with the capacity to run 200GPUs, can now run (tens of) thousands of ASICs (if they could afford them) on the same infrastructure.
Meanwhile the smaller folks who were running 10GPUs or less, who used to be able to say "well if bitcoin goes to hell at least I paid off a bunch of awesome videocards to game on" can decide to go back to gaming, or buy an expensive piece of hardware that can serve no purpose in their life other than bitcoin mining. Not as attractive to them.

To add some special sauce to the points above, and get back to why I started my thread as I did...

Mining is already an increasingly centralized institution, despite all the high barriers that you mentioned (overhead, capacity, facilities, etc). There was a post analyzing the top pools and their miners, and I believe the numbers ran something along the lines of, the top 3% of miners on average held between 25% - 37% of the total hashing power. To simplify that means if there were 100 miners, and 100 units of hashing power, the top 3% each held 8Units of Hashing power on average, and the bottom 97% held .8 on average, or 10x less (using 25%). Or 20x on average for 37%.

So we already see a trend towards centralization, and a change towards asics seems like it will only hasten in this direction for all the reasons above (easier for existing large scale miners, more cost prohibitive for small-scale hobbyists). I myself being a more middle of the road type, have already been making forecasts and calculations, and I see the rolling-over of returns into increasing power as one of the only real avenues as well, and with large scale yielding better / best returns. A bit of a go-big or go-home scenario. Not that I'm there yet, but it seems to be what may have to happen.

I agree with thoughtfan and to a limited extent your post. However, as a "long-time" member of bitcointalk (really 1.5 years isn't that long when you think about it), I can say that all this rubric sounds mightily familiar. When the network was expanding at a healthy clip alongside the expansion of BTC price the boards were filled with thread-wars about the barrels of cash that would be flowing in, vs. the people decrying how sorry they felt for the poor fools who would soon be selling their svelte bodies on the streets in attempts to repay their ill-considered mining purchases.

Both were right and both were wrong, some folks got in over their heads in their gleeful bitcoin lust (I remember one gentleman who claimed he spent $30k retrofitting his house with high-current lines), and some people made a mint off high-power farming rigs (some of the folks running 70+GH/s to this day on GPUs, eek). I myself was a middle of the roader, I expanded myself until I was limited by my household power capacity, and I made out well enough. I had to terminate my operation due to Californias high power costs before the evil times of the $2 coin set in, but I had repaid all my equipment, made a profit, had some fun, and happily move on.


So, I certainly understand both sides having their place, and I urge considered-enthusiasm, rather than dark gloom, or unbridled gorging.

Well let me ask you this, to what end exactly? Say I work out a strong correlative effect between the value of mining hardware on the market, and the price USBTC. Now I know how much mining hardware value is, what does that do for me?

The reason for most of these models (at least from my perspective, perhaps they do not agree) is that people are figuring the profitability under different scenarios for mining (and whether to buy in, or drop out). Knowing what the total hashrate will be does not help, except that from that I can calculate difficulty, via an additional step. So why not cut out the middle man and just model difficulty directly?