The regularity of bubbles
/u/jtsnau argues that there are no markets that are as regular as bitcoins, so the bitcoin bubble cycle is not realistic because no market has such predictable behavior. I ask him: why would bitcoins would not be expected to have such precision?
Bitcoins are obviously different than stocks. The fundamentals that determine the value of bitcoins are far more technical and regular than those that determine the value of stocks. Stocks always have a CEO, and a board of directors, and employees. People are impossible to predict, and the same person often reacts in two different ways when faced with the same situation again. Meanwhile, bitcoins rely to a much greater degree on math, programming, and universal laws. Computers always react the same way each time something happens.
With a larger machine-based influence, we would expect bitcoins to have regular bubbles because machines follow specific rules and patterns more often than humans do.
New proofs of work
There are a lot of papers floating around suddenly about replacing the bitcoin proof of work algorithm with some sort of signature scheme where the Coinbase transaction needs to be signed with the private key of the recipient. Proponents claim that this would decentralize the network by putting pools out of business.
However, in the same papers, they acknowledge that they want to preserve existing ASICs as the prime miners in the bitcoin network. So long as ASICs remain the primary miners, eliminating pooled mining makes bitcoins even more centralized.
The immediate effect of pools being eliminated would be the difficulty falling dramatically, and the price of ASICs falling as well. The only way to remain competitive in such a market would be to have huge amounts of money and huge numbers of ASICs. In a poolless world, you can't just connect one ASIC through your home network and expect to make money. The rapid obsolescence of ASICs guarantees that anyone with a single ASIC will see it go obsolete before any blocks are found, resulting in a total loss.
The only people who would be able to mine if pooled mining were eliminated using the signature method would be people who own lots of ASICs, and the number of those people would decline, resulting in a worse situation where huge corporations are vying for dominance, rather than groups of individuals.
New countdown
I believe the upcoming auction is so important to the price of bitcoins that I started a new countdown to it below. People are going to be shocked when this auction closes.
Other
- The Middlecoin pool, along with some others, is making a critical error in its mining algorithm that is resulting in decreased payouts for miners. Yesterday, we were able to earn $15/Mh/day during testing. I don't think they are cheating; my brother seems to agree that they simply haven't implemented their mining software right.
- Days until the auction: 8
- Days until July 24: 36