I read somewhere the Bitcoin developers were thinking about depreciating the ASIC miners since it's overtaking the network in the future by integrating scrypt with the current encryption. Where was this discussion and what's the outcome of it?
No, absolutely not. ASIC mining makes Bitcoin more secure and it would be absurd to change the design to make Bitcoin less secure.
With scrypt based mining, you don't need to invest in ASICs to compete with dedicated miners. That means any malicious organization can rent computing power, or use a botnet, to attempt a 51% attack on the currency. When they're done attacking the currency, they can just stop renting computing power. This makes it very vulnerable.
By contrast, to attack a currency that can be miner very efficiently with ASICs, you have to invest in ASICs. You can't use a botnet. You can't rent supercomputers or clusters. And if you do weaken the currency, you make your ASICs worthless, and you're now sitting with millions of dollars of hardware that's turned to scrap metal.
So no, I can't imagine the Bitcoin developers would consider destroying the security of Bitcoin. What possible benefit would there be?
And it will not make mining more egalitarian or Democratic. Economics tells us that if mining is profitable, more people will mine, until it's just barely profitable but not more profitable than anything else people can do. When it's just barely profitable, the mining community will consist of those with the best edge -- those who pay the least for electricity, those who can shave a few bucks of the hardware cost, and so on. It will be impossible for average people to compete -- they'll be better off buying Bitcoins.
Also, such a change would shatter confidence in Bitcoins. There's no possible way you could change the 21 million Bitcoin limit. And people who invested in ASICs are expecting to get a share of the remaining Bitcoins -- carving a new share for non-ASIC mining would cause those who invested in ASICs to get a lower return than they expected, punishing them for investing in Bitcoin. It would be completely out of the question, an absolute non-starter, inconceivable.
Bluntly, anyone who seriously suggests something like this has no conception of how the Bitcoin world actually works.
Changing the protocol rules to circumvent negative effects of a 51% attack would be the nuclear option -- and becoming reliant on that method would (and should) nearly certainly kill Bitcoin.
Gavin did mention this "rule change as countermeasure" though here:
But an attacker knowing that this is an option means that a 51% attack resulting in profit becomes even less likely. Essentially it is like communicating that there would be mutually assured destruction, and thus the only way to not lose is to not attack.