There's also the cost of setting it all up, the time in learning the tech involved or hiring those who do. If it cost you $X to produce, why would you sell it to me for less than $X? You'd be losing money on the production side.
The lower bound ought to be at least the cost to the miner that produced the new bitcoin (when they try and sell it or use it in the market).
The upper bound is essentially nonexistent. If I have $3000 to invest in bitcoin, what is the possibility of me getting a decent return on $3000 worth of mining hardware? Vs (based on the recent explosive growth) spend $3000 on BTC directly at $200 a piece and you have 15BTC. If it continues to generally rise in value against the dollar a portion of that can be turned back into USD later and spent on a more worthwhile rig, or just used in the BTC economy itself (to the extent that it exists).
> If it cost you $X to produce, why would you sell it to me for less than $X? You'd be losing money on the production side.
"Cost of production", in an economic sense, includes opportunity cost - that is, the amount of money I could be making if I did something else with the time instead, which can be more or less taken to mean a reasonable accounting "profit".
Edit: Also, I may sell it to you at a loss because I can't do anything better with it, if the price fell since I produced it.
> The lower bound ought to be at least the cost to the miner that produced the new bitcoin (when they try and sell it or use it in the market).
Yes, if the price of bitcoins falls below the cost of producing them, more won't be produced, but that won't actually prevent the price from falling further.
We may have misunderstood each other. I didn't mean to say that there was a strict lower bound on the price of bitcoins. It absolutely could zero out in a worst case scenario (for some people at least). I suppose what I was intending to refer to was a (somewhat) healthy bitcoin economy. Inefficient miners will be driven out of the market as the cost to participate exceeds their returns.
There isn't any ought to be for the lower bound. (In a successful bitcoin world) There is eventually going to be a clear relationship between the cost of mining and the reward available, but if some miner switches to mining his own variety of digital money, we don't suddenly owe him something for the effort.
If we end up with a very competitive market for using cryptography to clear digital transactions, miners might well face a situation where it is barely worth it to burn electricity.
I meant to say that was the per miner cost. A more efficient miner would see a lower production cost for their bitcoins. They'd then be able to either take advantage of their position (sell with a significant margin) or drive the other miners out of business (sell at a small margin that puts bitcoins at an uncompetitively low value). In either case they'd be able to expand their mining operation (or accounting operation once mining itself has low returns) to improve their odds and yield.
The lower bound ought to be at least the cost to the miner that produced the new bitcoin (when they try and sell it or use it in the market).
The upper bound is essentially nonexistent. If I have $3000 to invest in bitcoin, what is the possibility of me getting a decent return on $3000 worth of mining hardware? Vs (based on the recent explosive growth) spend $3000 on BTC directly at $200 a piece and you have 15BTC. If it continues to generally rise in value against the dollar a portion of that can be turned back into USD later and spent on a more worthwhile rig, or just used in the BTC economy itself (to the extent that it exists).