Thread by @monero

1/ The #TailEmission is coming in ~30d (block 2,641,623), so let's take a few minutes and walk through why the #Monero community chose a tail emission, how it works, and what it means for Monero user's and the project long-term.

Buckle up, this is going to be a long one!

2/ The Monero community, in stark contrast to Bitcoin's community, decided to include in Monero a "minimum subsidy", or "tail emission" in order to keep fees reasonable, ensure a lower bound of network security, and enable dynamic block sizes.

3/ This tail emission means that there will be 0.6 $XMR provided as a reward for miners in every block, instead of allowing the block subsidy to go to 0 as most other cryptocurrencies (like Bitcoin) have chosen to do.

This means there is not an arbitrary hard cap to supply.

4/ That 0.6 $XMR is linear, meaning Monero's inflation rate approaches 0% in perpetuity.

This makes Monero *disinflationary*, and unlike fiat or centralize cryptocurrencies, the supply is perfectly known, predictable, and able to be projected at any point in the future.

5/ Now as for why a tail emission is a good idea -- in cryptocurrencies like Bitcoin, having the block subsidy go to 0 means that at some point in the future the security of the network will depend *100%* on user's transaction fees.

6/ For Bitcoin, this means fees need to be significant enough to support a competitive, decentralized mining environment, or else the number of miners/hashrate will decrease significantly to meet market equilibrium.

7/ Currently, the transaction fees in Bitcoin only account for ~1% of the reward in each block, with the other 99% being entirely composed of the block subsidy that will eventually decline to 0 $BTC over time.

The future fee market in Bitcoin is a massive "known unknown".

8/ There are many other potential risks and attack vectors this lack of long-term security guarantees opens up for cryptocurrencies like Bitcoin, as laid out in this paper from 2016:

moneroresearch.info/index.php?acti…

9/ This tail emission means that Monero miners are not 100% reliant on transaction fees, and so can guarantee a specific income for themselves regardless of the fee market.

This security and assurance for miners is a big departure from Bitcoin's security model.

10/ Not only does this ensure Monero has a certain level of security forever, it removes the burden of security from being 100% on transaction fees, thus allowing transaction fees to remain reasonable long-term.

Both "hodlers" and users foot the bill for security over time.

11/ This tail emission also allowed the Monero community to design and implement a fascinating and unique "dynamic block size", where miners can automatically increase the block size in order to better handle congestion by taking a penalty to block subsidy in exchange for TX fees

12/ This is only possible because there will always be a 0.6 $XMR block subsidy in Monero via the tail emission.

This dynamic block size allows Monero to keep blocks as small as possible under normal conditions while allowing for temporary increases in times of congestion.

13/ While these dynamic blocks are not the ultimate solution to on-chain scaling, they allow Monero to be much more flexible in it's handling of temporary congestion than networks like Bitcoin, and is only possible thanks to this tail emission.

14/ The tail emission also ensures that there will always be new Monero entering the economy, replacing a portion of the Monero lost by clumsy users, incentivizing commerce, and allowing new entrants a way to get Monero without KYC (mining!) no matter the fee market.

15/ Ultimately, the tail emission allows the Monero network to scale better, ensure the long-term security of it's transactions, and keep fees reasonable to better enable Monero as digital cash while preserving its store of value properties.

16/16 Will Bitcoin's lack of a tail emission guarantee its failure? No. It's possible Bitcoin will remain quite secure, but it remains hard to predict.

Is it safer to have the insurance of a tail emission like Monero? Absolutely.

Additional Sources:

getmonero.org/resources/mone…
monero.stackexchange.com/questions/23/w…
localmonero.co/knowledge/mone…