The Bitcoin economy exhibits remarkable and predictable stability on the supply side based on the power costs of mining. However, that stability is challenged if cost-curve assumption is not solely expressed by the fair cost of power. As there is at least one major player, the botnets, that can operate at a power-cost-curve of zero, the result is a breach of Gresham’s Law: stolen electricity will drive out honest mining. This has unfortunate effects for the stability of the Bitcoin economy, and the result is an inevitable collapse.

Bitcoin trading started at a price of 0.01 USD, and therefore could potentially support up to 125 profitable miners at inception. The maximum trading price reached 32 USD, at which peak there was potential support for approximately 400,000 miners. Due to the shared nature of the difficulty parameter, it is transparent for all operators what their average costs curves are at any moment in time. As prices are reflected in the open market, every operator can regularly calculate estimated income against costs, and whether mining is profitable or not.

Stability when mining becomes unprofitable for an individual miner, he can either

• stop mining and hoping for better prices or less difficulty to continue mining again

• continue mining and hoping that the Bitcoins he mined will be more valuable in the future

• stop mining and sell the equipment, i.e., exit the business permanently

If a miner finds that mining is unprofitable, due to higher power prices, that miner can cease mining. In which case, the overall network capacity will go down again, and the difficulty will go down as well. When the difficulty goes down enough, lowest-cost idle miners will enter the business again, and continue mining, which will raise the difficulty againBitcoin trading started at a price of 0.01 USD, and therefore could potentially support up to 125 profitable miners at inception. The maximum trading price reached 32 USD, at which peak there was potential support for approximately 400,000 miners.