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I understand that bitcoins are currently produced at ~25BTC/10 min

If I understand correctly how fast a block is created is what determines how fast bitcoins are created.

If everyone starts using bitcoins it will create huge demand and price will rise if miners can't keep up with the adoption rate.

If a new technology appears (assume accessible to everyone so the problem of attacks on the network by trying to create a longer block isn't there) this will lead to a huge supply of bitcoins.

I'm trying to understand the dynamics of these two factors.

Is there a self regulating way where a sudden huge increase in the ability to solve for the block and how fast would this be?

Would a huge demand be also somehow self regulating or will it just spike the price?

marked as duplicate by o0'., Stéphane Gimenez, cdecker, eMansipater, Colin Dean Apr 21 '13 at 20:12

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  • "Would a huge demand be also somehow self regulating or will it just spike the price?" Spike the price. – Nick ODell Apr 7 '13 at 20:09
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    As for your first question, see this: What keeps the average block time at 10 minutes? – Nick ODell Apr 7 '13 at 20:10
  • so if i understand correctly the main difference is that the 2 week span for the update to normally occur is going to be shortened, and then next two weeks things are going to be back to normal right? – evan54 Apr 7 '13 at 20:48
up vote 1 down vote accepted

Increased demand would raise both the price for bitcoins as such, and also increase the fees rewarded to miners. So the effect would be an increased investment in mining efforts.

Technology advances would increase the networks total Hash/s rate. Which first of all would lead the network to rebalance and demand more hashes/BTC, thus keeping the output constant.

The dynamic aspect I find interesting though, is that until all miners have upgraded their relative contribution to the network would shrink, and thus their individual share of the return. They would therefore be force to choose either to quit mining (operating costs would be higher than the return) or invest in new hardware. Which in effect would lead to a pruning of miners and a reconfiguration of relative performance among the remaining.

I wonder if the economy can sustain a long tail of miners or if the major players will use such transitions to invest in enough hardware to raise the barrier to entry beyond the tail miners returns.

It would be interesting to see a simulation on http://insightmaker.com/

  • hi thanks for the answer, I was wondering if you could clear up the dynamic aspect paragraph as I couldn't quite understand it as it stands. Thanks! If I understood correctly increased demand will drive more people to mine and to mine with better equipment. If technology advanced there would be a shakedown so to speak? – evan54 Apr 7 '13 at 21:45

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