> Charlie Stross writes in the article kindly submitted here: "Bitcoin violates Gresham's law: Stolen electricity will drive out honest mining. (So the greatest

> Charlie Stross writes in the article kindly submitted here: "Bitcoin violates Gresham's law: Stolen electricity will drive out honest mining. (So the greatest benefits accrue to the most ruthless criminals.)" I try to follow most of the Bitcoin threads here on HN, but I've missed that argument before. You've missed this argument because it's an awful argument. It's a misunderstanding and misapplication of Gresham's law. It seems like the author simply wanted to use the phrase "bad X drives out good X" without bothering to understand what Gresham's law actually applies to. Even if the greatest benefits of mining accrue to botnet operators, that doesn't affect the incentives faced by other individuals or groups weighing whether or not to invest in mining rigs. The incentives are: are the fixed cost of hardware and variable costs of power and labor outweighed by the value of the bitcoins mined. Does not matter what other miners are doing. Because of the fixed supply of bitcoins and the increasing difficulty, botnets may have an advantage. However, because bitcoin is deflationary, the rising price of an increasingly supply-constrained asset might offset the diminishing returns. That's a risk investors are going to have to weigh. But that still isn't a case of Gresham's law.