Here's my rationale, and note that I specifically was talking about putting a new video card in an old system:
1. The difficulty increase of 60%, by itself, does not mean hardware won't be profitable.
2. If we extrapolate this difficulty increase out indefinitely, however, it does.
3. Because of this, people are going to let off putting in new hardware, which will moderate the difficulty increases down to somewhere in the 20-40% range within a cycle or two.
4. At that point, we will have reached a 'reasonable' return for a risky venture in the area of 10-30% annually.
I misspoke saying that they would increase at 50%+ every two weeks for some time. I think it's more likely we'll see one, maybe two more increases at that rate, then slower, but significant increases for the foreseeable future thereafter. That's what it will take to get bitcoin mining profitability in line with ventures of comparable risk. However, this most recent difficulty increase should not have surprised anyone, given how much more coins cost now than they used to.
1. The difficulty increase of 60%, by itself, does not mean hardware won't be profitable.
2. If we extrapolate this difficulty increase out indefinitely, however, it does.
3. Because of this, people are going to let off putting in new hardware, which will moderate the difficulty increases down to somewhere in the 20-40% range within a cycle or two.
4. At that point, we will have reached a 'reasonable' return for a risky venture in the area of 10-30% annually.
I misspoke saying that they would increase at 50%+ every two weeks for some time. I think it's more likely we'll see one, maybe two more increases at that rate, then slower, but significant increases for the foreseeable future thereafter. That's what it will take to get bitcoin mining profitability in line with ventures of comparable risk. However, this most recent difficulty increase should not have surprised anyone, given how much more coins cost now than they used to.
This is exactly what I think will happen as well eventually. However, with the current crop of miners, I predict that difficulty increases will level of way before we reach the level of 10-30% annual returns, because many are in it for a quick buck, and don't realize that something like 30% ROI annually is actually a pretty damn good investment. But like you said, difficulty has still a lot of room to grow before we reach that point.
At some point in far future mining will be saturated with miners who are in it for a long haul, driving the profitable hash/W ratio higher and higher. There may come time, when FPGA/ASIC miners are the only game in town.. Not for a while though.
