It is generally accepted that the market value of a commodity and the cost to produce that commodity tend to the same price in a free and competitive market.
these are not concrete economics ideas, sorry. This is the gold bug mindset and as the story has been told countless times this ignores the effects of credit, innovation and imho the entire premise of civilization itself. Is man just a resource extractor?
What does this have to do with gold other than gold being an example of a commodity? The cost to produce corn tends to the market price of corn, the cost to produce aluminum tends to the market price for aluminum, the cost to produce canola oil tends to the market price for canola oil. The reason is very simple: if the market price for corn is significantly greater than the cost of production, farmers will plant more corn and less potatoes to earn a greater profit. This action will increase the supply of corn, which will tend to reduce its market price, and eventually bring the profit margin for growing corn in line with other produce that could be produced on the same farm.
Peter, is the market for microchips related to the cost of sand?
after all microchips are made out of silicon right?
do you have any more pulp fiction economics to share with us?
I'm not sure if you are being intentionally obtuse, or if you actually don't understand:
The market value of a commodity microchips and the cost to produce that commodity those microchips tend to the same price in a free and competitive market.If the market price for "Commodity Microchip A" was vastly greater than its cost of production, then manufacturers would make more Microchip As and less Microchip Bs to earn a greater profit. This free-market dynamic acts to bring the cost of production inline with the market price of that commodity.
This is only true for commodities, however. Take something like 20nm SHA256 ASICs for bitcoin mining. The market price for these ASICs is much higher than the cost of production
because this technology is not yet commoditized. Only certain companies have the IP/trade-secrets for this technology, which means they can earn very high profits (far above the cost of production) since they have few competitors. But what we will see over the next few years is more players developing their own SHA256 ASICs to compete for the large profit margins currently enjoyed by KNCMiner, etc. This will drive the price of these ASICs down until they eventually become a commodity like a standard 12-bit analog-to-digital converter.
what is a 'commodity' Peter?
'co' = together
'mod' = measure
something that is communally measured. For instance we made milk a *commodity* when we developed ways to measure the quality and quantity of milk.
I dont know it seems you're obsessed somehow with the price of hashing gear. I don't really care because I think it's irrelevant and most people who seem to be present in these arguments are those who are invested in it somehow. I figure that sometime in the past few years someone capitalized on both Bitcoin, the engineering muscle that defines/develops/justifies it, and the gigahash hardware. Such an investment would be very valuable because they could offer under-the-table insurance for the chain(and it *just so happens* that such offerings popped up around this time). Actually not so long ago there was an IBM exec hovering around the Color Coin project, presumably he saw an opportunity for hardware sales.
things like NXT threaten such a profit nexus because it invalidates their entire premise of worth.
it's very sad.
-bm
