I'm having a hard time wrapping my head around how much money it will cost to protect the network long-term.
Let me first give you an example.
Let's say I have $10 in my pocket. How much would I be willing to spend to protect that $10? The answer has to be $9.99 or lower. It wouldn't make any sense to spend $10 or more to protect the $10.
In the case of Bitcoin, the current(at the time of this writing) market cap of Bitcoin is about $134 million.
Math: $13.798 * 9.714M = $134 million
Now if I mosey on over to Butterfly Labs
http://www.butterflylabs.com/products/and assume for simplicity's sake that everyone is using the most efficient mining equipment we see that there is a total of $10.1 million worth of mining equipment protecting that $134 market cap.
Math: [16,642 Giga Hash/s 25.2 Giga Hash/s] * $15,295 = $10.1 million
So, really, if an attacker were willing to spend more than $10.1 million right now, they could pull off the 51% attack, which would, at the very least cause serious upheaval in the Bitcoin network.
The question then becomes, is a 10:1 ratio enough? Do we need a near 1:1 ratio for Bitcoin to be protected against wealthy and powerful enemies? Could the bitcoin economy be sustainable if so much of its resources were wasted on protecting the network?
This is a brutal scenario, because unlike gold or silver, if a successful attack happens, all Bitcoins and all users within the network suffer. Whereas if a bank with gold gets robbed, the gold in my home safe or silver buried in my back yard is still secure and my value has not been lost.
Can somebody please explain to me how this is not a fatal flaw in Bitcoin?
