In my opinion, one of the goals of Bitcoin was that the network would be 'decentralized' and owned by 'everyone' and 'no one'. However, it is very clear that there are two classes of people in the Bitcoin world. Those who 'own the network' and those who 'pay to use the network'. What I mean by this is that only miners profit directly from the operation of the network. Everyone else pays the miners through inflation or fees. Mining is now centralized to the point that 3 or 4 people could colude and control the majority of the hashing power. These people own the network, everyone else pays to play.
It will always be the case (with Bitcoin) that specialization will tend make mining profitable only to a few and benefit from economics of scale.
Look; it's obvious that as mining gets more difficult, less people will participate in mining. But the way the free market works is that any who want to compete, can. If 3 or 4 people "own" the network, a company with startup capital can enter the market freely. Right now people are competing for the block reward. That's
going to decrease. The increase will come from fees. If bitcoin becomes highly popular, then the fee reward should eventually outpace the block reward. This encourages others to enter the mining arena.
Just because Joe Blow with $200 can't play, doesn't mean the network is centralized.
Also, the idea that only miners profit from the network is wrong. Many people enjoy reduced costs of transmitting money as a result of bitcoin, and thus profit greatly.
Unfortunately, the cost of running operating the network isn't entirely born by the miners. Every user is providing bandwidth and mirroring services and these users are not reimbursed in any way. Miners, because they are centralized, will tend to favor more centralization, larger blocks, etc until all aspects of the network grow beyond what can be truly decentralized.
Users are not required to mirror the blockchain; lite clients exist. And of course miners want to centralize themselves, but the thing stopping them from doing that is competition. Monopolies don't exist for long in truly free markets.
I contend that an ideal crypto-currency should allow everyone who owns it to profit from its use and that owning & mining should be equally profitable. This would be accomplished by paying dividends to owners from 50% of the transaction fees. From a capital perspective, owning such a crypto-currency would be just as profitable as mining such a crypto-currency. Competition would drive the ROI of investing in ASIC/etc to the dividend rate and no lower because if given the choice between buying ASIC for $1M or buying $1M of the crypto-currency both would expect the same rate of return yet going the ASIC route is far more risky.
The effect of a dividend-paying crypto-currency is that it would be even less inflationary that Bitcoin. If you remove half of the inflation bitcoin has experienced then the total value of everyone's bitcoins would be almost 2x. If there was profit to be made by holding Bitcoins then their value would be over 2x.
By all means, get one going. If it's better than bitcoin, it will flourish. If not, it will fail.
