Will Mining Leases Promote Positive Price Action?

[nameface]

In the early days of Bitcoin many miners were immediately reselling coins to cover expenses and "assure themselves a profit". This created constant downward pressure on price, but at least it was all part of one big network bootstrapping mechanism... We are now into a new phase of mining, and corporations are taking control of the space and offering the retail investor an opportunity to get in on the action in the form of leases (cloudhashing, hashpower, etc.).

My first thought regarding this contracted commoditization of mining power was that it will be bad for Bitcoin. It continues to centralize power by putting it in the hands of growing corporations, and offers a fairly low ROI vis a vis today's prices, and as compared to a hardware purchase.

My next thoughts went the other way. The important thing to take into account here is the nature of the investor. These new retail investors are a different breed than early miners. We are past the bootstrap phase, and this new money comes from the disposable cash of new true believers. I see some investors starting to believe in Bitcoin as a true compliment to precious metals as a globally recognized store of value. If this is true, then these new buyers will not sell easily. Therefore, as new money comes in via mining leases, we can expect upward pressure on price.

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[marcovaldo]

We are now into a new phase of mining, and corporations are taking control of the space and offering the retail investor an opportunity to get in on the action in the form of leases (cloudhashing, hashpower, etc.).

Anyone can mine, and a lot of people do that.
It is not centralized at all ...



In the future, difficulty will decrease, and it should be easy to maintain the network.
Miners will only get some fees to pay for electricity.

[nameface]

In the future, difficulty will decrease, and it should be easy to maintain the network.
Miners will only get some fees to pay for electricity.

So the network will become more decentralized as time goes on, and difficulty will decrease? I dig your optimism

[theonewhowaskazu]

Logically, the profitability of mining should always be roughly tied to the change in Bitcoin price, since in a flat market, difficulty eventually catches up to the price of Bitcoin stabilizing it in terms of electricity costs.

So, if we assume that in the long term the Bitcoin price will eventually become stable, then we can assume that the profitability of mining in the uber long term won't be very great (for miners now, however, it will clearly be very profitable since given such a scenario the price of the mined Bitcoins would be absurdly high).

As such the only incentive for a large company to monopolize mining would be if individual miners could be effectively prevented from mining. The only cases in which such a scenario could occur would be if such a company were to have a significant technological advantage in terms of power consumption over an extended period of time, OR if some law or restriction would be placed on mining, requiring a 'license' or the like in order to engage in the practice.

Otherwise, it seems fairly obvious that mining will become more decentralized with price stability simply because there would be no great incentive to monopolize it.

[nameface]

Otherwise, it seems fairly obvious that mining will become more decentralized with price stability simply because there would be no great incentive to monopolize it.

I'm starting to see what you mean. In the long long run, when most mining revenue is derived from fees, and the price of Bitcoin is much more stable, the incentive to mine will become tiny.