For any cryptocurrency that's profitably mineable on AWS the difficulty immediately increases to the point that it's no longer profitable.

Yes, this IMO is the biggest flaw in bitcoin's design. It makes miners impossible to commoditize. As soon as a new ASIC becomes widely available, it defeats itself and becomes useless at the next difficulty increase.

Consumer ASICs stopped being a thing for this reason. Now we have mega-secret custom hardware that can't be shared without destroying the investment put into their development.

I don't think Satoshi's intention was that only a handful of massive investors with their own proprietary chipsets would be able to mine, but that's the natural consequence of the difficulty mechanism, and it really undermines bitcoin's core principle of decentralization.

Perhaps not for the entire time, but bear in mind that the prices of cryptocurrencies fluctuate and you can spin up the VMs when it is profitable and shut them down when it isn't.

Would this mean that the currency would never fluctuate below that price point?

It's a price ceiling, not a floor. If prices go up high enough, it's worth turning on EC2 instances and paying for them with the mined cryptocurrency until prices fall. There's some wiggle room above the break-even point, since there is some delay between turning on miners receiving USD, and the miner has to eat that risk.

Ah, yes, that makes sense, thank you!

not if you have a free-fall dump going on. This happens when investors lose hope in the long term future

> Maybe not for Bitcoin, because people have invested heavily into dedicated mining hardware

The thing is, it seems like people always invest heavily into dedicated hardware when using FPGAs. I'll be interested to see what people actually end up using this service for.