But if GPU mining is relatively cheap, more GPU owners will jump on it, making the difficulty higher, giving less reward, removing the relative cheapness from GPU mining.
Higher difficulty and less reward per CPU core gets irrelevant when nobody mines with CPU. If GPU mining is 25x more efficient (as was claimed somewhere in this thread), structure of the mining public will change. No more few giant miners with big expensive rented VPS farms, instead large majority of smaller miners with already owned GPU cards with only electricity costs to cover. Wouldn't that make mining cheaper, allowing everybody to sell XPM cheaper? This seams obvious to me that GPU mining will drop the XPM price significantly, maybe I'm missing some factors.
As the processing power on the network goes up block reward will go down. What happens to price of XPM when block reward is less than 5 XPM per block? or less than 2?
Just having a more efficient solominer had a big impact on the block reward. GPU mining will have a huge impact.
Correct me if im wrong but Primecoin should keep ~1minute block time with decreasing block reward as the hashing power increases. This means less XPM per day for way more hashing power. Most other coins dont change the block reward and as such have the same reward per day no matter the hash power on the network. Right now around 16,000XPM are created every day. When GPU miners come online and the block reward drops to 5xpm per block we will see about 7,000XPM per day. Less coins generated a day will make the price go up.
By my observations Primecoin can do nothing but go up as the hash power increases.
Am I wrong?
Yes, i think you are wrong. Block reward will not decrease not nearly as quick as you think, we are mislead by quick decrease from the first days of the coin to the current level of 9.4 difficulty. Let me explain why: link between the block reward (number of XPM/block) is exponential, and is described by the formula:
reward = 999 / difficulty ^2
So, for block reward to decrease to the levels you described:
5 XMP/block:
difficulty = sqrt(999/5) = 14.13506278
2 XMP/block:
difficulty = sqrt(999/2) = 22.34949663
See, wee will not reach similar levels of difficultly in the foreseeable future, I' may dare to say we will not reach them ever with only GPU mining without ASIC and BTC like adoption, no matter how super efficient that GPU miner will be.
So, no significant decrease of block reward is expected, just the re-distribution of the mined coins from big-mining, rich, VPS expensively generated coins to the small-miner, cheaply produced GPU generated coins. If you produce something with big expenses, you have to sell it high, if you produce it cheaply you can afford to sell it low. I'm pretty sure GPU mining will drop the XPM price significantly.
