SC2 has a special difficulty algorithm that allows for vast decreases in difficulty per 360 blocks (~200%) but only small increases (~14%).  It seems that this could be exploited by using a script that does the following:
1.) Mines SC2 when ((number of blocks / 360) % 2 == 0), that is, every other difficulty difficulty adjustment period.
2.) Mines BTC when ((number of blocks / 360) % 2 != 0).  This would allow you to use your cards for BTC in the meantime.

If a large number of people use such a script, for example 90% of the miners, the difficulty will quickly drop to what it would be if only 10% of the network were mining.  This would maximize return per watt for people mining SC2, yielding bitcoin when they aren't mining SC2.

The effect should be pretty obvious.

1. Miners will hit it hard before the block size change, trying to hoard the coins as much as possible.
2. The price will rise, but only temporarily.
3. Miners, now getting more than 6 times less the amount of SC per watt, will stop mining.
4. The difficulty will fall because no one is stupid enough to mine more for less, and the price with it.
5. People will continue mining at the lower difficulty, effectively causing stabilizing the price exactly where it was before, if not lower due to lack of confidence or interest.

This is the same thing as if he [Coinhunter/realsolid] were to generate tons of coin just for himself (which he already is), as it increases the real value CH has (compared to USD/BTC) while decreasing the real value miners may obtain.  It will effectively cause a difficulty and price crash.

Code:

void BlockHash_Init()
{
    static unsigned char SomeArrogantText1[]="Back when I was born the world was different. As a kid I could run around the streets, build things in the forest, go to the beach and generally live a care free life. Sure I had video games and played them a fair amount but they didn't get in the way of living an adventurous life. The games back then were different too. They didn't require 40 hours of your life to finish. Oh the good old days, will you ever come back?";
    static unsigned char SomeArrogantText2[]="Why do most humans not understand their shortcomings? The funny thing with the human brain is it makes everyone arrogant at their core. Sure some may fight it more than others but in every brain there is something telling them, HEY YOU ARE THE MOST IMPORTANT PERSON IN THE WORLD. THE CENTER OF THE UNIVERSE. But we can't all be that, can we? Well perhaps we can, introducing GODria, take 2 pills of this daily and you can be like RealSolid, lord of the universe.";
    static unsigned char SomeArrogantText3[]="What's up with kids like artforz that think it's good to attack other's work? He spent a year in the bitcoin scene riding on the fact he took some other guys SHA256 opencl code and made a miner out of it. Bravo artforz, meanwhile all the false praise goes to his head and he thinks he actually is a programmer. Real programmers innovate and create new work, they win through being better coders with better ideas. You're not real artforz, and I hear you like furries? What's up with that? You shouldn't go on IRC when you're drunk, people remember the weird stuff.";
    BlockHash_1_MemoryPAD8 = new unsigned char[BLOCKHASH_1_PADSIZE+8];  //need the +8 for memory overwrites
    BlockHash_1_MemoryPAD32 = (uint32*)BlockHash_1_MemoryPAD8;

    BlockHash_1_Q[0] = 0x6970F271;
    BlockHash_1_Q[1] = 0x6970F271 + PHI;
    BlockHash_1_Q[2] = 0x6970F271 + PHI + PHI;
    for (int i = 3; i < 4096; i++)  BlockHash_1_Q[i] = BlockHash_1_Q[i - 3] ^ BlockHash_1_Q[i - 2] ^ PHI ^ i;
    BlockHash_1_c=362436;
    BlockHash_1_i=4095;

    int count1=0,count2=0,count3=0;
    for(int x=0;x<(BLOCKHASH_1_PADSIZE/4)+2;x++)  BlockHash_1_MemoryPAD32[x] = BlockHash_1_rand();
    for(int x=0;x<BLOCKHASH_1_PADSIZE+8;x++)
    {
        switch(BlockHash_1_MemoryPAD8[x]&3)
        {
            case 0: BlockHash_1_MemoryPAD8[x] ^= SomeArrogantText1[count1++]; if(count1>=sizeof(SomeArrogantText1)) count1=0; break;
            case 1: BlockHash_1_MemoryPAD8[x] ^= SomeArrogantText2[count2++]; if(count2>=sizeof(SomeArrogantText2)) count2=0; break;
            case 2: BlockHash_1_MemoryPAD8[x] ^= SomeArrogantText3[count3++]; if(count3>=sizeof(SomeArrogantText3)) count3=0; break;
            case 3: BlockHash_1_MemoryPAD8[x] ^= 0xAA; break;
        }
    }
}

Oh noes, furries.  FOR SHAME

         hash rate
tbx    0.00119                     
fbx    0.00011                     
sc    0.03689 (rapid crash in hash rate over the past few days and hash rate is 6-10x that of CPUs doing scrypt work for ltc/tbx so who knows the actual number of CPUs this represents)               
ltc    0.00407 (increase of 20% over the past few days)

For a while SC2 seemed at the top, but there has been a shift over the last 24-48 hours towards litecoin and a huge loss of hashing power for SC2.  It looks as if from here Litecoin will dominate (which is unsurprising: GPU "proof", tons of pools, open source, and deflationary).

In the same vein, the price of ltc has been moving up while sc2 has been falling.

Well, it was a while coming and I think it's a while to go.

Putting my bets on $2 lows and $2.80 to $3.00 later this evening.

According to my miners I'm getting 42 kh/s on my AMD cpus

According to the pool/number of shares I'm getting 250kh/s

...what?  If it's kh/s it's probably using scrypt, but I have no idea how the client itself calculates kh/s.

I'm only running 2 cpus and I'm currently the person with the highest hash rate on the pool, lol.  AMD 6-core once again is fastest?

...but you should sell your coin.

Bitcoin is inflating wildly right now, almost as much as it deflated back in May.  The hash rate will keep going down, but at the same time, the difficulty will always be decreasing so net rewards for miners will probably not diminish in the extreme.

People are pulling out, and the people left mining will be the ASICs and large scale GPU farms in locations with cheap electricity.  They won't be making much, but they will be making some and that will be enough.

The next big jump in bitcoin price will probably not occur until the currency actual deflates -- that is, when block size shrinks to 25 BTC/block some time next year.  This is also granted the currency survives this long, but as long as the infrastructure is up and trading is still profitable to the trading companies and the traders it will be.  Until then, we will be in freefall until we hit some kind of equilibrium.

This is probably obvious to most people, but if you're just hopping aboard now and haven't figured things out -- bitcoin is inflationary in the near term, deflationary in the long term.

(It should be noted that if you haven't been paying attention either, TBX mining is exploding because it effectively utilizes the CPU cycles from mining rigs, the currency is secure long as lolcust doesn't dump his 7m TBX into the market, and because of effective programming from both Artforz and lolcust.  Hop on if you want.)

...maybe someone has already implemented it.

Yes, this is the harsh reality of the bitcoin -- it would be a true deflationary commodity if difficulty were able to not go back down over time with relation to the number of people mining it, but since it does it is neither a deflationary nor inflationary commodity but both depending on the direction of the difficulty and the hash rate.

An ideal digital, actual deflationary digital commodity would have variable block sizes based on hash rates (to ensure that even if network hash rate went down, transactions would still go through), would start at a very high difficulty, and would increase in difficulty based on the amount of it mined but never decrease in difficulty.  It would also have an infinite supply, but the difficulty in obtaining more of that supply should accelerate with the speed of computing.  As soon as someone implements this, I'll stop mining bitcoin and start mining that because I think such a currency would hold its value over time much better than bitcoin.

That's basically how I see bitcoin now, as inflating in the short term because of the decreasing hash rate... but is it possible for someone to program something like the above, to ensure that the supply of the digital currency is always shrinking over time?  Do you think this is a good idea?

I would hazard a nickname of "Aurums", after gold and its limited supply on Earth and dropping the -coin suffix because I would rather it be thought of as a commodity.

Reasoning:
- Low volumes
- Price stagnation
- Expected difficulty decrease in a couple of days
- Gold crash
- Global stock market crash
- Diminished interest as reported by google searches (which highly correlate with market price/momentum)



Seven-day target: 3.25$ USD/BTC

I forsee 6.25$ USD/BTC by the end of the day.

No particular reason for the enthusiasm.

8/28/11: Battle of the high frequency trading software.

Here is what I think:
- Sell walls are fake at Mtgox.
- New high of 9.40-9.75 by the end of the day.

$7.25 by the end of the day.

This is it, the long slide back to $4-5.

Gold is down, equities are stabilizing.

Bitcoin is heading south for the winter.  I predict $9.50 by the end of the day.

Nice volume at Mtgox.  Good to see bitcoin actually being used for something.

Lots of buyers of bitcoin, not a lot of sellers.

Big, insurmountable 11$ wall on Mtgox similar to Saturday's 12$ wall.

Fortune cookie reads: A starship ride has been promised to you by the Galactic emperor

Once of the problems with bitcoin is liquidity.  The idea would be for someone to produce difficult to counterfeit certificates (like actual currency) that could be exchanged for bitcoin itself.  The way it could do this would be to mail the certificates somewhere after writing your address on them, and then the BTC would sent to that address, after which the end user could exchange it for currency or whatever.  The "bank" could take 2% or whatever fee when issuing the currency or redeeming it, eg if you buy a 10BTC bill you would pay 10.20BTC for it for the convenience of a bill.

This would be one of the easier ways that BTC could be used by people to trade for real goods in real time.  This way, no long wait times for BTC for confirmations or whatever -- it would basically be normal cash that'd be easy for even non-tech saavy people to use.

Probably not the first person with this thought -- what do you guys think?  Further it'd be even more anonymous as there would be no more block chain/transaction records that indicated anything meaningful since BTC would constantly be coming or going from the "bank" to whomsoever.

[The Bitcoin Crash]

The Bitcoin Crash
Timothy B. Lee

Bitcoin, the world’s first peer-to-peer digital currency, has lost almost half of its value against the dollar since the start of August, falling from $13.50 to around $7.

It’s now looking increasingly likely that the record-high price of $32 on June 8 represented the peak of a speculative bubble that is now slowly deflating. The interesting question is: where will the price decline stop?

http://blogs.forbes.com/timothylee/2011/08/07/the-bitcoin-crash/

Further carnage.

[If the USD equivalent is less than the end of the year hardware costs and power costs plus a small 5% or so share, no one will mine, period, and the price must rise. If the USD equivalent is more than the end of the year hardware costs and power costs plus a small 5% or so share, everyone will mine and the price must fall.]

Bitcoin will currently continue to lower in value as long as the following is satisfied:
- Miners can sell the BTC they make for more than they can easily invest it for (>5% annual, maybe >2.5% in the current economic atmosphere)
- The global economy is a downfall and people are looking to liquidate assets while they are still worth something.
- The BTC surplus as a result of high speed mining and immediate resale of mined BTC continues, that is, there is a low demand for BTC while the number of sellers remains high.

Eventually a point must be reached at which the miners are no longer willing to sell any BTC and an equilibrium must be established.  Where is this?

Average price of power in the US: 0.1109$ / KWh (2.66$ USD/day)
Typical hash rate/KWh: 1,750 MH/s (AMD 58xx/69xx cards), or 0.84 BTC/day
Average amount of time to mine 1BTC at this hash rate: 1.19 days
Total cost/BTC: 3.16$ USD

Let's looks at the current price of BTC, 7.5$ USD or so.  This represents an insane 99% profit after addressing for power.  Of course, hardware must be factored in here too, and it is assumed that at the end of the year most miners will have spent more on hardware than on power.  How much more?  A rig that can mine 1750 MH/s probably costs in the vicinity of 1000-1300$ USD.  The value of the hardware probably declines by about 30% each year.

Looking at each miner per year, let's say the rig costs 1200$ USD and by the end of the year just 840$ USD from devaluation.  The bitcoin miner must make 360$ to recoup this loss.  This makes our math easy, because it's clear than that he or she must make at the very least about 1.00$ per day.  We also know that we owe 2.66$/day of electricity, or about 971$ per year.  We mine 6.30$ USD a day (0.84 BTC), so our ROI (return on investment) is still 72% percent.  This is an enormous and unsustainable value.

Altogether, the cost of mining with this 1,750MH/s rig is 1330.90$ USD per year.

We need to make all this back plus at least 5% for ourselves.  That's about 1400$ that we'd need to make that year, to make this worthwhile.  That would mean we'd have to be mining 3.84$ USD of BTC a day, or that the value of BTC would have to be 4.57$ USD.

What matters is not the amount of BTC being mined each day or the difficulty or whatever.  What matters is the USD equivalents of whatever is being mined per day.  If the USD equivalent is less than the end of the year hardware costs and power costs plus a small 5% or so share, no one will mine, period, and the price must rise.  If the USD equivalent is more than the end of the year hardware costs and power costs plus a small 5% or so share, everyone will mine and the price must fall.

The current price seems to be unsustainable, as there is no reason to invest anywhere else if BTC mining returns such insane amounts.  For people investing in mining rigs there is another loss fear in case the market collapses and you lose the amount you spent on electricity and the devaluation of your hardware, but there is no way that price is an additional 65%.  There are no 70% junk bonds; at best it represents an additional maximum of 5%.

ASIC mining/other highly targeted hardware may not change this much because the resale value of something that can only mine BTC will be worth dickall in the event of the BTC market collapsing and must be purchased cautiously at the present time.

Volumes are healthy, not only in US markets but also in Canada and Britain.  It is the first time for the latter two to stabilize in terms of buyer/seller volume, normally seller volume for CAD/pound highly outstrips buyer volume.  It appears that US buyers may now be operating in these markets to make cash through forex when the price of BTC fluctuates as the overall trade volumes for these foreign markets has exploded over the past 24 hours.  This should bolster investment in the US market as well and enhance stability as BTC becomes further an international monetary instrument like gold.

Overall network hash rates have fallen sharply so the incoming supply of bitcoin through this medium is low.  Forecast: Final Mtgox close will be 10.75-11.5 by the end of the day.

Volumes on Mtgox appear to be pushing the price down to stabilize around 11.5-12$ USD

CAD and GBP markets are getting hammered because the UK and Canada have less faith in BTC, particularly Canada.  Buying BTC from Canada and reselling on Mtgox right now should net a healthy 4-8% until the slide at Mtgox stops.  Canada buyer volumes are particularly bad right now, expect price to hit $9-10 CAD by the end of the day unless there is a turnaround at Mtgox

Trade volume at Mtgox is heavy, which is good.  A small downturn is the inevitable effect of increasing difficulty as users cash out because of reduced profitability, so I would expect price to rise later this week as BTC become more scarce from the greater difficulty and the people who are selling off diminish.  DJIA/S&P 500 also hit hard today so speculative investors may also be trying to cut their losses and sell off.