After about 3 difficulty changes after block 24000, NMC and BTC will have the same difficulty it seems.
So what's the relative value of two coins that have exactly the same difficulty to produce?
So what's the relative value of two coins that have exactly the same difficulty to produce?
You're looking at it from a strange perspective. After NMC block 24000 BTC will have their normal difficulty to produce and suddenly for a vast majority of namecoin miners NMC will have an effective difficulty of 0 -- they will be produced as a free side effect of existing BTC mining. Their value will be based purely on their utility (and demand), and should no longer have any bearing on their relative difficulty compared to BTC.
Their relative value could go either way, of course. But I suspect the shift from current namecoin miners to bitcoin miners won't have a positive relative price impact in the short term. Long term depends heavily on whether 7200+ namecoins are consumed every 10 days or not.
I'm just taking the other side of the trade out loud. Consider merged mining with Namecoin as a dilution of the new overall "Coin" market. Given the same difficulty and hash rate, miners are simply given twice as many coins. If you don't presume a bias towards either type of coin, then you've just diluted the market by adding twice as many coins over the long run.
The ratio of Bitcoins to Namecoins will approach 1 to 1 in the long run. Both equally scarce. Both having required the 1/2 of the same investment to create. Using that admittedly incomplete analysis, then long term Namecoins are worth about the same as Bitcoins. Plus, both are worth half as much as one would have been before the dilution.
If you are building a trade plan around this idea, then you are trading from the long side of the currently thin Namecoin market.
This analysis is flawed - you cannot assign worth to something without making an assumption about the demand for that good. You're assuming that namecoins will have the same demand as bitcoins, which is certainly not going to be true unless namecoins will become a general purpose currency instead of being limited to registering domain names. As a result, there will be no dilution of bitcoins. Since namecoins will essentially be a byproduct for most miners after merged mining, NMC might experience depreciation. Depends on whether the miners hold onto the NMC or dump them on the market.
Also, difficulty is completely arbitrary as far as price is concerned. The only things that matter are supply and demand. Supply will not change because the network adjusts difficulty. Demand - who knows what it will do.
You will likely have (even a small amount) a spill over in the money that goes into bitcoin into namecoin. Yes they may not be at parity but keep in mind namecoins have a usage that bitcoins do not but at the same time have all the properties that bitcoin has. There are likely outcomes that namecoin could become a competing crypto currency on a higher scale than you can imagine.
Should be interesting because in 6 months, at the most, if you own a namecoin you will be able to purchase a 1000 times more domain names than you can today. Currently it takes 11.1 NMC to purchase a domain name. With that same 11.1 NMC in 6 months you will be able to register 1,110 domains.
Sound familiar? The exponential growth is very similar in that of bitcoin.
After the last difficulty adjustment and the price overall rising in the ratio of NMC to BTC I'd say people are hanging on to them NMC's.
