Trying to figure out the relations between hash rate and price. Are they connected? I wondered if the following is sound:
- When hashrate goes up, difficultly adjust and goes up.
- when difficulty goes up, the cost of mining goes up.
- when the cost of mining goes up, the price goes up.
Is this correct?
Money as a representation of value:
Imagine you wake up everyday, expand your energy in a productive enterprise.
1. You make coffee, someone appreciate your coffee and exchange your coffee with a value.
2. You swept the floor for someone, they appreciate your work and exchange your hard work with a value.
3. Like David Beckham, you score a tremendous goal and bring a moment of joy to millions and they show their appreciation and you received millions in value.
Now, imagine you must spend all the value in a single day else they degrade to nothing by tomorrow.
Most will think that is horrible. But what if they degrade in a week? Or a year? Or 10 years?
Would you prefer to store all the value into something that does not degrade? That is why gold has been a store of value for thousands of years. They can hardly degrade but their supply does gradually increase even though at a slow rate.
But when you store them in fiat currencies, the degradation is a certainty. In Malaysia, the Ringgit has degrade over the past 12 years in the range of 30% - 100% depending on how you measure them.
Bitcoin fixes this.
Store your value in something that do not degrade.