Tail Emission Could Be the Next Big Controversy for Bitcoin; Understand the Proposal

After overcoming BIP-110, a proposal aimed at reducing spam on the network, Bitcoin may have already found its next big controversy: tail emission.

In short, this would mean that Bitcoin would lose its maximum limit of 21 million coins and have a minimum and infinite issuance of new coins to subsidize miners, who maintain the security of the network.

The topic is not new, but it was revived in recent days by developer Peter Todd at a conference held in Canada.

Currently, miners are earning 3.125 bitcoins for each mined block. This amount will drop to 1.5625 BTC in mid-April 2028 and then to 0.78125 BTC in 2032, 0.390625 BTC in 2036, and so on, until it reaches zero.

Therefore, this model makes miners increasingly dependent on the price of Bitcoin and transaction fees.

For Peter Todd, a solution to this problem would be to eliminate the limit of 21 million bitcoins, offering a fixed and infinite reward per block.

The developer, who was even pointed out as Satoshi Nakamoto by an HBO series, had already published a text on the subject in 2022. At that time, he claimed that the current model may not be sustainable and that tail emission is not inflationary.

Participating in the bitcoin++ conference in Toronto, Canada, Todd spoke again on the subject, reigniting the controversy.

"This brings me to my point about whether Bitcoin would have had tail emission from the beginning. Would that be acceptable? Probably, we would all say we are Austrian economists and make an analogy with gold: economically, it’s all right. Maybe 1% a year is a bit excessive, but is there some number below which no one would really care?"

Continuing, Todd states that people do not care about this change for economic reasons, but rather political ones. "If Bitcoin had this from the beginning, no one would care," he claims.

Justifying his point of view, the developer says that Bitcoin is operating at a significant decline from its historical peak. Therefore, a slight annual inflation would not make a difference in its price.

Continuing, Todd acknowledges that the system is functioning currently, but that there are no examples of others with such low rewards, like Bitcoin is about to face in the coming decades, in operation.

"I mean, which alternative cryptocurrencies even use proof-of-work currently? There really aren’t many left. That doesn’t mean proof-of-work is bad. It’s just that we don’t have examples from which we can learn, because Bitcoin has been so dominant in this type of currency that uses proof-of-work. And, when you look at other examples, do they even have non-trivial transaction fees? Generally, no. Sometimes they do, but it’s remarkable how problematic the estimation of transaction fees is in practically any other currency. Bitcoin is the only one that doesn’t even need to think about that kind of thing."

In conclusion, Todd explains that people will migrate to other solutions, such as second-layer or Lightning Network, to avoid paying high fees.

As this is not the first time the tail emission proposal has been discussed, it has already received criticism previously. For example, Cobra, the owner of the Bitcoin.org website, stated in 2022 that he would rather die than see Bitcoin exceed its limit of 21 million units.

Adam Back, developer of Hashcash, claims that the proposal will never be approved by other developers. "I don’t know why he doesn’t give up on this idea. It’s never going to happen, ever," Back wrote on social media.

"Instead of a tail emission, how about reallocating UTXOs to miners if they remain unspent for more than 100 years?" proposed the profile Farside Insights. In response, Todd states that the problem will erupt long before 100 years.

Seeing the conversation between Farside and Todd, user hodlonaut points out that both proposals attack the two most fundamental properties of Bitcoin.

"The fixed supply and unspendable coins have never been considered optional characteristics of Bitcoin. The fact that they are now being treated as negotiable or even undesirable, by the author of the proposal to eliminate the OP_RETURN limit and by a member of the Brink board, is, in my opinion, something that deserves attention."

Finally, after the fiasco of BIP-110, the tail emission proposal could be the next big debate for the Bitcoin community, especially with the upcoming halving in about 600 days. As can be seen, there is already a clear division of opinions.

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