Author: Peter Todd 2022-07-09 15:13:44
Published on: 2022-07-09T15:13:44+00:00
In a recent bitcoin-dev post, Peter Todd discusses the idea that tail emission is not inflationary, but rather disinflationary. This means that the yearly supply inflation steadily decreases towards zero. However, true monetary inflation includes lost coins, both intentionally and accidentally lost. It is possible that even with tail emission, Monero may currently be a monetarily deflationary coin, as the lost coin rate could be higher than the 0.8% apparent tail emission rate. If an existing coin were to implement tail emission as a means to fund security, choosing an appropriate emission rate would be simple: decide on the maximum amount of inflation one is willing to have in the worst case, and set the tail emission accordingly. Any coin without a premine starts with infinite inflation. Bitcoin in its first four years had yearly inflation rates of infinite, 100%, 50%, and 33%. Therefore, deciding on a maximum amount of inflation is equivalent to deciding on a premine. While in the long term, a capped supply doesn't differ from an uncapped supply, the 21M limit is central to Bitcoin's identity. Removing this limit would result in something that can no longer be called Bitcoin. Some believe that basing identity on a technical point that isn't even correct is foolish. If Bitcoin turns out to be unstable without a reward in approximately ten years, the market as a whole will likely redefine Bitcoin to remove the 21M limit. Whether or not it can do that fast enough to avoid Bitcoin dying first is an open question.
Updated on: 2023-06-15T22:36:03.108597+00:00