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They are not obligated to play by the rules and fairly compete with each other; if their goal is not to acquire bitcoins by mining but to disrupt the system by
by bcoates 14y ago
They are not obligated to play by the rules and fairly compete with each other; if their goal is not to acquire bitcoins by mining but to disrupt the system by publishing problematic blocks, they don't raise the difficulty factor.
There are absolutely economies of scale for mining (it's just making and running custom hardware, a classic economy of scale business), it's just the combination of low profitability and a small market [1] means it's not worth doing unless you're getting paid to attack the network.
[1] at the very peak pre-crash price, $341 million/year of revenue for mining every single block.
- mrb 14y agoImagine a graph where the x-axis represents the size of your mining farm (from small to big), and the y-axis the percentage of the mining income spent on operating costs. For small values of X the curve is close to zero. As we move to the left the curve suddenly jumps, and then decreases and decreases but without ever coming back close to zero. This illustrates my point: small miners have operating costs close to zero, above a certain size you suddenly start needing to spend quite a bit on operating costs (first rack, first A/C unit, etc), and as you scale up and up yes there is some amount of economy of scale, but never enough to reduce your operating costs close to zero. I say "economies of scale do not exist" but what I mean more precisely is that they are not sufficient to cause big miners to push small miners out of the market.