1. Humans tend to cooperate willfully, if it's profitable for them 2. Cooperating has costs, which are mainly determined by the size of the group. The larger the group, the higher the costs 3. Cooperating happens, if the cost < profit
Do you think all these ancillary service providers could be as competitive at mining as the Hashpower-focused providers?
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They don't have to be. That's the beauty of it. If they use blocks they have mined as a means of improving services they provide, essentially vertically integrating from the ancillary services they provide into mining, it's not an isolated market anymore. Cost/benefit changes.
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wouldn’t the mining coming from these guys be a tiny fraction compared to the overall mining done by the Hashpower-focused people? If you have 1 TB blocks, ancillary service providers won’t be able to put such a big dent
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1/ You're making an unstated assumption about the cost/benefit equation involved. Let me go to a bit of an extreme, fabricated example to illustrate the point...
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2/ Suppose there were a service you could provide that could be priced at X in the market without being included in the blocks that you, the service provider mines... But it could be provided at 2X if included in your blocks.
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3/ Let's say that X is significant. That X is enough at the market equilibrium quantity*price to justify providing the service on its own, and that 2X would come from added consumer demand (the only scenario that makes sense in this case.)
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4/ So the service could command 2X, plus greater volume... And btw, the tx fees would be paid to yourself, so you'll save on tx fee costs, despite adding mining costs.
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5/ Presumably, by providing this service, you are able to earn more revenue by being a miner than not, and it's likely that you'll also benefit sufficiently by this added revenue that you can outcompete other miners, even specialized miners, based on revenue rather than costs.
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6/6 Obviously this is a bit of a ridiculous example, but I hope it illustrates the thinking. In reality, these services will have to operate on all margins at high volume, so any small increase in revenue or decrease in costs will actually be substantial.
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