careful, but even so, does this mean that Bitcoin miners who want to make a profit are going to need to dump general-purpose machines in favor of specialized hardware such as FPGAs or ASICs? Or is buying a high-end GPU still good enough?
People focus too much on the "profit" miners make, and not the verifiability and anarchism they are supposed to be providing to the bitcoin network. In that regard, arguably the most important, bitcoin has already failed entirely. Of course, bitcoin is a startlingly obvious example of code with politics baked in, and you're seeing the natural play-out of that political philosophy in bitcoin with little artificial interruption; corruption, oligarchy, and the creation of a false market controlled by monopolistic cartels which fluctuates in price only when it is profitable to the cartels for it to do so. Much of this is beyond the control of an algorithm. The wealthy will always be able to out-mine the poor if it's a straight battle of who-buys-more-hardware. However, bitcoin has fallen so quickly because it's created a threshold cut-off for those below a certain income bracket, so that those who are not already reasonably wealthy can now not hope to compete in mining operations. Litecoin was doing better while it was CPU-bound, because the cost of setting up a mining operation on CPUs is more linear; the poor get poor hardware, the rich get rich hardware, but the relationship isn't as exponential as it is with CPU->GPU->FPGA->ASIC. Now that Litecoin's basically GPU only, it's also a little worse than it started, but there's no evidence at this point that it'll go FPGA. However, I do think we need an even Lite-r 'coin, running a hash that won't even scale in GPUs. Keep this to the unit of hardware that's most scalar in quality/price and most accessible to the people who most need to trust a currency; the people spending the greatest proportion of their income in daily life, the middle and lower income fraction. I'm interested in the outcome of the password hashing competition to see if this yields something 'coinable. My ideal hash for a 'coin, unrealistic as it is even in theory, is a hash that practically defines the instruction set and architecture of a prototypical CPU, so that translating it into specialised hardware is either impossible, or merely creates a more efficient CPU, which is better marketed as a CPU than a mining rig. In other words, the state-of-the-art in CPUs is exactly the state-of-the-art in CPUcoin mining. :)