Do you have any first hand experience with the system, either as a user, developer or anything substantial at all?LOL! A bitcoin shill! Seriously? Wow. Too funny.
Am I the only one shaking my head and laughing at the same time?
a game I once played called Diablo 2
If the quantity of bitcoins approaches a limiting sum of 21 million and the only thing preventing an attack are the computations of miners, isn't the algorithm flawed to begin with? An exponential decay in the average reward for successfully cracking a block would lead to a similar decay in the number of people willing to mine for bitcoins as the effort:reward ratio becomes more and more ridiculous. Without the miners, it becomes easier and easier for people to exploit the system; allowing them to double spend and run negative balances etc.
Forgive me if I missed something during my 20 minutes of extensive research
Isn't that relying on the premise that the positive change in demand must always be >= the negative change in the average reward for mining? Otherwise a point will be reached where the demand for bitcoins is not great enough to force an appreciation and maintain the incentive for miners. Which would, again, result in the integrity of the whole system being jeopardised. I am still just working with the idea that the computations are the only things affecting the robustness of the system's security.You don't account for price changes. If total hashing power increases, mining becomes more expensive. Prices will have to go up to make mining still profitable. In practice servers are mostly a "sunk cost" (certainly at this point where a lot of hobby mining occurs) so when prices fall too low most miners simply keep the btc. It will be interesting to see how market demand, mining capacity and prices evolve.
It's hard to compare gold here as it is a commodity with industrial applicaitons, i.e., its value does not rely entirely on its usefulness as a store of value or medium of exchange.The dynamics you describe also occur in the gold market. Mining of gold is much more expensive than it used to be - all the low hanging fruit has been mined long time ago. This doesn't make gold any less of a store of value - to the contrary, this feature is a key requirement.
My friend and I were discussing why the price dipped and then stuck around $14, and we think it is because it is too much hassle to deposit/withdraw funds. We don't think it is entirely a coincidence that prices were higher when it was possible to use Paypal to transfer money.