Why Infinite Token Emission is a Design Failure, Not a Feature

Infinite emission guarantees eventual collapse. It creates a permanent, structural sell pressure that outpaces any sustainable demand, turning the token into a perpetual value-leaking asset for holders. This is not a feature for long-term alignment; it is a subsidy that must eventually end.

The core failure is incentive misalignment. Protocols like SushiSwap and early Curve models conflate liquidity bribes with long-term value accrual. This creates a mercenary capital treadmill where emissions fund yields that immediately exit, a dynamic starkly contrasted by Uniswap's zero-emission, fee-driven model.

Evidence from DeFi 1.0 is conclusive. The death spiral of countless forked yield farms demonstrates that infinite inflation cannot be outgrown. Sustainable models, like Aave's transition to fee capture or Compound's controlled distribution, explicitly cap or eliminate perpetual issuance to prioritize real economic activity.

Infinite emission is a subsidy. It masks the true cost of security or incentives by creating perpetual sell pressure, forcing new tokens to fund old promises. This is a Ponzi-like dynamic where sustainability depends on infinite user growth.

Protocols should internalize costs. Successful systems like Ethereum (post-EIP-1559) and Arbitrum use fee revenue, not inflation, to pay validators and sequencers. Their tokens accrue value from utility, not dilution.

Evidence: Compare Filecoin's ~20% perpetual inflation against Arweave's one-time endowment. Arweave's endowment model creates a permanent, prepaid cost structure, aligning long-term incentives without dilution.

Infinite emission is a subsidy. It funds operations by diluting existing holders instead of generating sustainable protocol revenue, creating a permanent sell pressure that outpaces utility-driven demand.

The inflation tax is inescapable. Projects like SushiSwap and early Curve models demonstrate that emission-driven liquidity is mercenary and abandons the protocol the moment incentives shift.

Protocols cede economic sovereignty. Relying on token printer governance forces constant inflationary votes, turning the DAO into a central bank that must devalue its own currency to function.

Evidence: Compare Uniswap's zero-emission model, funded by fees, with high-inflation DeFi 1.0 tokens; the former accrues value to holders, the latter requires perpetual new capital inflows to maintain price.

Infinite emission is a subsidy, not a sustainable reward mechanism. It creates a permanent sell pressure that the underlying utility must perpetually outpace, a race most protocols like early SushiSwap or OlympusDAO forks lose.

The 'community-owned' narrative is a distraction from capital inefficiency. Protocols like Uniswap and MakerDAO demonstrate that finite, value-accruing tokenomics drive superior long-term alignment than inflationary farming.

Evidence: Analyze any high-inflation DeFi token's price/TVL ratio against its emissions. The correlation between rampant inflation and value dilution is a statistical certainty, not a market anomaly.