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The price of bitcoin affects bitcoin miners. People will turn off / sell miners when the price plummets, or go out and buy a miner/hardware when the price is on

The price of bitcoin affects bitcoin miners. People will turn off / sell miners when the price plummets, or go out and buy a miner/hardware when the price is on the rise. Bitcoin miners affect the difficulty level directly, by mining or not. Furthermore, there are a finite number of bitcoins to be mined. The higher the difficulty, the faster they are being mined. Therefore, the scarcity of each individual coin is going UP as they are mined. Let me say that another way: before a coin is mined, it is still available for anyone to get by mining. After it is mined, it is in a private wallet number, worth whatever the market says the owner should reasonably receive for it. As coins are mined, the supply of total available coins goes DOWN. As long as demand continues, price will go UP. BTC become more scarce with each coin mined, because there is one fewer to mine in the future, and every one to be mined after it will need to be done so at the new (assumedly higher) mining cost. The difficulty level might be thought of as a direct index of the COST of mining a new coin. As that cost increases, supply for coins goes DOWN. Ceterus paribus, supply DECREASES, price INCREASES.

olalonde 13y ago
> The higher the difficulty, the faster they are being mined. Therefore, the scarcity of each individual coin is going UP as they are mined. You are wrong. Coins are mined at a mostly fixed rate regardless of difficulty. > BTC become more scarce with each coin mined They are actually becoming less scarce since the total amount of coins in circulation increases every ~10 minutes (until there are ~21M coins in circulation). Believe it or not, supply is increasing but demand is increasing at a much faster rate, hence the price going up. Mining difficulty on the other hand has pretty much no influence on price (although price does have an effect on mining difficulty).
- bradleysmith 13y ago
  I concede to your point, that makes sense. The rise in difficulty is to regulate that fixed rate of producing new coins, I'm certainly wrong there. Scarcity of coins to the market goes down w/ each new coin mined, you're right. BUT, because we know exactly how many coins there are available to mine, doesn't this make the total number of coins available to you via mining go DOWN? If all the world's gold was in a single, perfectly measurable and publically accessible vein, would someone moving it from that publically minable place to a private reserve make its scarcity go UP or DOWN? There is the risk of the blockchain failing drastically, but past that it can be assumed that you have THAT MANY FEWER COINS available to mine, in total, right? I may be thinking about this in the wrong way entirely, appreciate the comment.

olalonde 13y ago

> The higher the difficulty, the faster they are being mined. Therefore, the scarcity of each individual coin is going UP as they are mined. You are wrong. Coins are mined at a mostly fixed rate regardless of difficulty. > BTC become more scarce with each coin mined They are actually becoming less scarce since the total amount of coins in circulation increases every ~10 minutes (until there are ~21M coins in circulation). Believe it or not, supply is increasing but demand is increasing at a much faster rate, hence the price going up. Mining difficulty on the other hand has pretty much no influence on price (although price does have an effect on mining difficulty).

bradleysmith 13y ago
I concede to your point, that makes sense. The rise in difficulty is to regulate that fixed rate of producing new coins, I'm certainly wrong there. Scarcity of coins to the market goes down w/ each new coin mined, you're right. BUT, because we know exactly how many coins there are available to mine, doesn't this make the total number of coins available to you via mining go DOWN? If all the world's gold was in a single, perfectly measurable and publically accessible vein, would someone moving it from that publically minable place to a private reserve make its scarcity go UP or DOWN? There is the risk of the blockchain failing drastically, but past that it can be assumed that you have THAT MANY FEWER COINS available to mine, in total, right? I may be thinking about this in the wrong way entirely, appreciate the comment.