Does discovery of flowing water on mars means that life even in microscopic form is possible ?????
It's always been possible however improbable it was. The discovery of flowing water gives us a good place to look for life as we know it.
What has been discovered is not exactly flowing water like a stream on Earth.
It's more of a highly salty sludge which only appears when the temperature and pressure are just right.
Nevertheless it is water bearing salty sludge and life is known to exist in similarly extreme conditions here on Earth.
I think it's fair to say that over the past 30 years or so we have discovered that life on earth can survive under surprisingly difficult/extreme condition's. I think you would have to be brave to rule out any possibility of life on Mars based on current knowledge.
Is there any reason to think that life need conditions more hospitable to originate than to merely to exist in?
I think it's reasonable to assume that the best conditions for life to originate would not be in the sort of environments where extremophiles are found on Earth.
The reasoning being that the extremophiles we know of seem to be related to other less extreme organisms which have adapted to a more hostile environment.
Having said that though, the suitable conditions for life to originate could be quite various, there being no particular ideal temperature or suchlike.
Life on earth is widely believed to have most likely originated near hydrothermal vents.See http://www.whoi.edu/news-release/study-tests-theory-that-life-originated-at-deep-sea-vents for discussion.
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