Why a Disinflationary Schedule Is Superior to a Hard Cap

A fixed 21M cap creates a long-term security crisis. As block rewards trend to zero, security must be funded solely by fees, creating volatility and potential for catastrophic attacks.

• Security Reliance: Shifts from predictable issuance to volatile fee market.
• Historical Precedent: Post-halving miner capitulation events show system stress.
• The Endgame: Fee revenue must permanently exceed attack costs, a dangerous assumption.

The burn mechanism creates a variable, net-disinflationary supply. Security is funded by a consistent, predictable issuance while the burn regulates economic activity.

• Predictable Security: ~0.5-1% annualized issuance funds stakers, independent of fees.
• Economic Regulation: High network usage burns more ETH, creating deflationary pressure.
• Sustainable Model: Security budget does not vanish; it decouples from extreme fee volatility.

A disinflationary schedule starting at 8% and decreasing 15% YOY to a 1.5% long-term rate. It funds security and growth while credibly committing to low, stable future inflation.

• Explicit Decay: Transparent, pre-programmed reduction in inflation rate.
• Staking Yield Stability: Provides predictable rewards to validators without a hard cliff.
• Growth Funding: Initial higher rate subsidizes network expansion before tapering.

A fixed block reward of 10k DOGE forever creates permanent, uncapped inflation. This fails to provide scarcity or a credible path to a security budget not dominated by issuance.

• No Scarcity Signal: Inflation rate asymptotically approaches ~3.8% indefinitely.
• Dilutive: Constant new supply pressures price, requiring perpetual new demand.
• Weak Security Model: Relies on inflation forever, not transitioning to fee-based security.

A hard cap creates a predictable, terminal date for security funding. Post-issuance, validators/miners must rely solely on transaction fees, leading to a security budget crisis as seen in Bitcoin's block subsidy halvings. This forces a dangerous reliance on volatile fee markets.

• Predictable Attack Vector: Security budget becomes a known, diminishing target.
• Fee Market Volatility: Network security becomes hostage to speculative trading activity.
• Long-Term Viability: Creates a structural incentive decline for network defenders.

A disinflationary schedule (e.g., Ethereum's ~0.5% annual tail emission post-merge) provides a perpetual, minimal security subsidy. This creates a stable, non-zero floor for validator rewards, decoupling security from extreme fee volatility while maintaining a credibly neutral monetary policy.

• Security Floor: Guarantees a baseline reward for validators, preventing a race to the bottom.
• Fee Market Independence: High fees are a bonus, not a requirement for survival.
• Smooth Transition: Avoids the economic shock of a sudden, total subsidy removal.

A fixed, capped supply can lead to hoarding and liquidity drying up, as seen in early-stage Bitcoin. This reduces the asset's utility as a medium of exchange within its own ecosystem (e.g., for gas, staking, governance). A static monetary base fails to adapt to a growing network's needs.

• Deflationary Spiral: Incentivizes holding over using, reducing on-chain economic activity.
• Staking Penalties: Makes slashing and honest validation more costly in real terms.
• Protocol Treasury: A fixed-cap asset limits a DAO's ability to fund development long-term.

Protocols like Ethereum (via EIP-1559 burn) and Helium (via Net Emissions) demonstrate dynamic models. Issuance can be algorithmically adjusted based on network usage, staking participation, or governance votes, creating a feedback loop that aligns supply with utility.

• Demand-Responsive: Burn mechanisms reduce net supply during high usage, creating deflationary pressure.
• Staking Yield Management: Issuance can target a specific staking ratio to optimize decentralization.
• DAO Treasury Funding: A small, continuous issuance can sustainably fund grants and core development.

A hard cap front-loads miner/validator rewards, creating a short-term extractive mindset. Early participants are incentivized to maximize profit before the subsidy ends, potentially at the expense of network health (e.g., ignoring upgrades, supporting contentious forks). The long-term stewards of the network are not the ones who benefit most from its creation.

• Pump-and-Dump Dynamics: Early miners have maximal incentive to sell, not build.
• Governance Mismatch: Those with the most stake when the network is young may not care about its state decades later.
• Upgrade Resistance: Changes that reduce miner revenue are fiercely opposed, stalling progress.

A disinflationary schedule with a long tail aligns validator/miner incentives with the infinite time horizon of the protocol. As seen with Ethereum's transition to Proof-of-Stake, validators are incentivized to maintain the network's health and value in perpetuity to earn the continuous, albeit smaller, yield. This fosters a builder, not an extractor, culture.

• Steward Mindset: Rewards are earned by securing the network's future, not just its past.
• Smooth S-Curve Adoption: Incentives support growth phases without a hard stop.
• Pro-Governance: Long-term holders are more likely to participate in responsible governance.