The future of the bitcoin

[Allary]

I'm looking into investing some money into the bitcoin (although I think I'll wait till the current bubble stabilizes), but I just had some worries about its future.
My understanding of the bitcoin is still elementary so please forgive me if I'm asking questions that have already been answered hundreds of times.

I realize that Bitcoin mining has grown exponentially more difficult and the cost of mining now often exceed the rewards of mining (electricity and hardware costs). Given that this will only continue in the future, especially considering that the usage of the bitcoin is outpacing the advancement in computer processing speeds, can we expect that, eventually, mining will be unprofitable to the vast majority of people? If this happens, then we might expect that bitcoin mining will be taken over by large companies with high economies of scale that can still turn profits. This, however, would undermine the bitcoin as a public, decentralized currency. Furthermore, if the rewards for bitcoin mining were increased, such that mining became attractive to more people, then this would only devalue the currency by flooding the market. How does bitcoin propose to solve this problem of diminishing returns on mining?

Will we soon see a spike in the price of bitcoins as the demand for the currency increases but its suppliers face further diminishing returns for their efforts?

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[tampazeus]

How does bitcoin propose to solve this problem of diminishing returns on mining?

Continued mining as the profitability of mining diminish (block reward halving every 4 years) can happen if

1. BTC price can rise
2. More transactions
3. Peoples mining at a loss to support Bitcoin idea and/or support their BTC invesments

[Birdy]

I'm looking into investing some money into the bitcoin (although I think I'll wait till the current bubble stabilizes), but I just had some worries about its future.
My understanding of the bitcoin is still elementary so please forgive me if I'm asking questions that have already been answered hundreds of times.

Don't worry, this is the newbie section, feel free to ask whatever you want.

I realize that Bitcoin mining has grown exponentially more difficult and the cost of mining now often exceed the rewards of mining (electricity and hardware costs). Given that this will only continue in the future, especially considering that the usage of the bitcoin is outpacing the advancement in computer processing speeds, can we expect that, eventually, mining will be unprofitable to the vast majority of people? If this happens, then we might expect that bitcoin mining will be taken over by large companies with high economies of scale that can still turn profits. This, however, would undermine the bitcoin as a public, decentralized currency. Furthermore, if the rewards for bitcoin mining were increased, such that mining became attractive to more people, then this would only devalue the currency by flooding the market. How does bitcoin propose to solve this problem of diminishing returns on mining?

Mining is for Bitcoin like gold transport trucks are for gold. It's necessary that there is some competition, but mining doesn't need to be done by everybody.

Will we soon see a spike in the price of bitcoins as the demand for the currency increases but its suppliers face further diminishing returns for their efforts?

My personal bet is yes ^^ Although "soon" may be a bit longer.
If the adoption doesn't stop and the supply of new coins dwindles, this will happen. But only the second one is certain

[Allary]

You do realize if that USB miner mines 0.001 and bitcoin is one day worth 10 000$.. well you do the math.
Most ASICs don't ROI right now, some run them only because of the network.

Yes, but competition won't allow that condition to last. The price of the bitcoin would have to fall, otherwise everyone would start mining. Assuming that it is more efficient for large companies to mine because they have more efficient computers then natural barriers to entry will force out your everyday miner. The only steady state I can see being realized is one where there are enormous companies dominating the mining, which will effectively destroy its internal regulation mechanism (that being that no one entity can influence it).

[odolvlobo]

Will we soon see a spike in the price of bitcoins as the demand for the currency increases but its suppliers face further diminishing returns for their efforts?

My personal bet is yes ^^ Although "soon" may be a bit longer.
If the adoption doesn't stop and the supply of new coins dwindles, this will happen. But only the second one is certain

Mining has very little effect on the supply of bitcoins because the supply of bitcoins from mining is tiny compared to the total supply. The number of newly mined bitcoins is less than 10% of the bitcoins sold on exchanges.

You do realize if that USB miner mines 0.001 and bitcoin is one day worth 10 000$.. well you do the math.
Most ASICs don't ROI right now, some run them only because of the network.

The problem with that argument is this: if it costs 0.002 BTC to mine 0.001 BTC, then a person would rather just keep the 0.002 BTC if a bitcoin is worth $10,000 one day. Right now, the people paying 0.11 BTC per GH/s on cex.io are going to mine less than 0.065 BTC. A smart person would just keep the BTC instead.

[zouave]

I think we've reached a point where mining is not rentable anymore, if you want to have some BTC, you better buy them instead of mine them.

[Birdy]

Will we soon see a spike in the price of bitcoins as the demand for the currency increases but its suppliers face further diminishing returns for their efforts?

My personal bet is yes ^^ Although "soon" may be a bit longer.
If the adoption doesn't stop and the supply of new coins dwindles, this will happen. But only the second one is certain

Mining has very little effect on the supply of bitcoins because the supply of bitcoins from mining is tiny compared to the total supply. The number of newly mined bitcoins is less than 10% of the bitcoins sold on exchanges.

The effect may be greater than you think. Bitcoins on exchanges are traded back and forth, obviously the number of newly mined coins isn't that high in %.
Also there is a psychological effect when we approach the next halving, I think it will have an impact.

[poelling92]

You do realize if that USB miner mines 0.001 and bitcoin is one day worth 10 000$.. well you do the math.
Most ASICs don't ROI right now, some run them only because of the network.

Yes, but competition won't allow that condition to last. The price of the bitcoin would have to fall, otherwise everyone would start mining.

Depends how much effort you need to put in mining 0.001 BTC. With continuously rising difficulty, it will be hard to mine this amont in one day for 1TH miner next year

[linuxnewbie]

I think we've reached a point where mining is not rentable anymore, if you want to have some BTC, you better buy them instead of mine them.

Beware of false cognates. The correct word is 'profitable.'

[krishatnet]

I think bitcoins have good future. More people using them.

[Interized]

I'm looking into investing some money into the bitcoin (although I think I'll wait till the current bubble stabilizes), but I just had some worries about its future.
My understanding of the bitcoin is still elementary so please forgive me if I'm asking questions that have already been answered hundreds of times.

I realize that Bitcoin mining has grown exponentially more difficult and the cost of mining now often exceed the rewards of mining (electricity and hardware costs). Given that this will only continue in the future, especially considering that the usage of the bitcoin is outpacing the advancement in computer processing speeds, can we expect that, eventually, mining will be unprofitable to the vast majority of people? If this happens, then we might expect that bitcoin mining will be taken over by large companies with high economies of scale that can still turn profits. This, however, would undermine the bitcoin as a public, decentralized currency. Furthermore, if the rewards for bitcoin mining were increased, such that mining became attractive to more people, then this would only devalue the currency by flooding the market. How does bitcoin propose to solve this problem of diminishing returns on mining?

Will we soon see a spike in the price of bitcoins as the demand for the currency increases but its suppliers face further diminishing returns for their efforts?

You do realize if that USB miner mines 0.001 and bitcoin is one day worth 10 000$.. well you do the math.
Most ASICs don't ROI right now, some run them only because of the network.

True, or they have free/cheap electricity.

I don't have to pay for mine. 

[EccLipSe]

Miners will be cartel with high tech asics with huge capacity. Miners will get only transaction fees because bitcoin will be rise till 21million.
Bitcoin will me more thrusted from any other currencies because it is not depended any country or goverment.
Manipulations and value changes will be minimized.