Thread by @LucasNuzzi

The potential lack of security in Bitcoin's PoW as it transitions to a model without block subsidies is often used to rationalize and justify [perpetual] inflation.

Here are five reasons why I don't believe Bitcoin's security model will ever require perpetual inflation👇

1\ I recently wrote a piece on Schnorr signatures that explored how demand for private transactions will increase L1 fees.

In essence, new transaction types will incentivize the use of privacy-preserving techniques that increase demand for block space:

medium.com/digitalassetre…

2\ The adoption of quantum resistant techniques will also result in larger (and more expensive) transactions.

Post-quantum crypto algorithms require larger key sizes, which in turn increase the size of non-witness data in a transaction. For more, read:

eprint.iacr.org/2018/213.pdf

3\ As businesses and Lapps are built around the #LightningNetwork, a big part of their opex will be channel management. That will ensure constant demand for L1 settlement as these operators rebalance channels and optimize connectivity & capacity. Read:

blog.lightning.engineering/posts/2018/05/…

4\ Channel management solutions and Watchtower-as-a-Service are inevitabilities that will also increase demand for L1 settlement. So will future solutions for BTC hodlers who want to provide liquidity to L2 and receive passive income for doing so. Read:

blog.bitmex.com/the-lightning-…

5\ Other solutions like @Blockstream's Liquid and eltoo may have similar effects. It's early, but feature specialization like the issuance of private financial products on Liquid can be an interesting way to digitalize and transact real world assets in BTC
blockstream.com/2018/07/02/liq…

While concerns about inflation are very premature, these five factors make me confident about Bitcoin's monetary policy.

What other factors can you think of?