@hipster.fat.ass - Thanks for sharing these thoughts. This is very interesting.
If I understood what you offered here correctly:
You're suggesting that they (TPTB) will mine at large scales and dump their earnings onto the exchanges in order to keep the price down on the coins. This would effectively drive miners out because there is no profit in it.
This is very interesting and worth discussing more I think.
I see a few holes in your idea:
Can you help me understand how you got from
- reducing the coin prices vs fiat
- to forcing miners out
- to they control mining
- to force everyone to work through their exchanges.
This chain of events doesn't make a lot of sense to me. There may be something you see that I don't so please help me to understand if you don't mind.
Regarding item 1 - the reduction of the coins value vs any fiat that a miner would want to have.
If TPTB attempted this, the deflationary nature of cryptocurrency design works against them.
Coins get lost, there is usually a finite limit of them, and they get used for commerce not just for exchange into other currencies. These are all deflationary activities that put upward pressure on the coin's value against any other commodity.
Because cryptocurrencies are deflationary they wouldn't be subject to a permanently low cost. Price suppression would only be the case for new coins minted. For anyone to suppress the prices based on just minting alone they would need to own the entire mining market. (Even if TPTB matched the amount of hardware out there for the over 900 coins out there they couldn't possibly own the entire coin minting activity. Difficulty increases help to prevent this. More miners means diminishing returns on adding mining hardware.)
Also, 2 factors come into play when suppressing the price of anything.
Are people using the coin within the coin's ecosystem of buyers and sellers? (Those coins don't get bought and sold on the currency exchanges so they permanently support the value of the coin vs what ever currency you miners would like to have.)
For anyone to do what you suggest there would need to be a derivatives market that could be sold into oblivion the same way Silver and Gold have been. In order for this to be effective there would need to be a price "fixing" authority established and people would have to agree to use it as the "price".
I think paper markets for crypto coins do exist now or soon will... so this could be half of your equation. But, without a fix and people completely losing faith in the coins this simply couldn't happen.
Regarding item 2 - the forcing of miners out of the market.
Let's assume your case in item 1 is valid.
It would take a long time (if ever) to drive miners out. This is evidenced by some recent history. Miners have been mining for many years at a loss, so clearly profitability isn't the only motivating factor behind why people mine.
I mine because I hope to make a better world and I'm sure I'm not the only one. The recent surge in people trying to profit on crypto coins by mining is very recent (just in the last 6 months or so really).
Regarding item 3 - they control the mining.
Assuming they could get more consensus that the rest of the entire planet... sure they could control the mining. They would really need a LOT of mining hardware to beat out all the other miners on the entire planet.
The scale of this kind of operation would have positive economic impacts in many industries. Who provides the power at this scale? Where is the hardware manufactured, purchased, stored, integrated, managed, and maintained? You're talking about an absolutely ENORMOUS effort (the kind of effort that would eclipse the GDP of many small countries). That money would be showing up somewhere in the form or increased job demand, manufacturing demand, power demand, and likely many other "increases" I can't think of ATM.
I guess the banks have endless fiat currency so buying endless amounts of "mining resources" seems like it could be a reasonable thing.
I think the probability on the previous steps is very low but assuming TPTB nailed them all... How you get from this step to the next step is where I'm confused.
Regarding item 4 - they force everyone to work through their exchanges.
Once a coins is accepted by some key large players, there are zero requirements for anyone to use an exchange. Key players like payment networks or "everything under one roof" players like Amazon make the need for exchanges less and less with every new key player that gets onboard.
If your coin is accepted by a vendor selling something you need then there is no need for a middle man like an exchange. There is no absolute need for exchanges to exist. They are just facilitators of transactions.
Also, most exchanges right now are not beholden to a government. Crypto exchanges are regulated in the US (and the US puts pressure on exchanges in other countries) but this isn't a planetary standard.
I really like what you offered here but, is this just theory you're offering or do you have anything concrete to work from?
I don't think it will be as "easy" as you're offering here but there does seem to be something here worth thinking about.
Is this just a theory or do you know of mining hardware manufactures that have been selling at large scale to TPTB to execute on something like this?