Subnostr

The block "subsidy" is literally a subsidy... As in new Bitcoin is printed and the existing holder's Bitcoin are debased. So in this way the coinbase is a form of taxation (taxation via inflation) paid by all existing holders.

Dikaios1517 1y ago

Ah, gotcha.

I knew that the subsidy is new Bitcoin, but never really thought of it as debasing the existing Bitcoin in the same sense as we could say with Fiat, since there is no terminal cap for Fiat's supply, while there is for Bitcoin's.

If someone owns 1000 Bitcoin's, that is about 0.005% of all Bitcoins that will ever exist. The new Bitcoi's added by each block will not make this percentage smaller, since we know the maximum that there will be, so I don't think I would call the block subsidy debasement that existing holders "pay for." Especially since it has not resulted in the purchasing power per unit going down.

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Reed 1y ago

Yea I know, it's semantics. The real reason that inflation of the Bitcoin supply isn't the same as inflation of fiat or even gold is that 1) as you pointed out, there is a terminal supply that we can all agree will never change and 2) Bitcoin is voluntarily adopted, meaning that unlike fiat money printing, we all agree that the miners should be subsidized at an exponentially decreasing rate.

Bitcoin is perhaps the only example where taxation via inflation is not a form of theft. The difference, as a libertarian would put it, is consent. There is complete consensus among all users of Bitcoin that its inflation rate schedule is important to fairly distribute the total supply, protect the network, and incentivize miners to process transactions until transaction fees alone can support this function.