Hi Anton. Thanks for your question.
New issuance of coins is a transfer from value from all coin-holders to the recipients of the new issuance. This is because the value of each coin is determined by supply and demand, and new issuance increases supply. Therefore issuing new coins does not increase the total amount of value in the system, it only transfers values from the coin-holders (in proportion to how many coins they hold) to the recipients.
(If issuing new coins created new value then we could solve all of the world’s problems by having the consensus rules just issue more and more new coins faster and faster until everyone was rich!)
This is a fundamental truth about cybercoin monetary policy: there are only two mechanisms of sourcing value that the consensus rules can use to effect monetary policy: issuance (which transfers value from all coin-holders according to how much they hold in total) and transaction fees (which transfer value from the people making transactions according to how many transactions they make).
And, there are only three destinations of value that the consensus rules can use to effect monetary policy: sending it to the miners, sending it to hard-coded addresses, or sending it to all coin-holders (by burning it, which increases the value of the holdings of all coin-holders).
Obviously there’s no point in taking value from all coin-holders (by issuance) and then send that value to all coin-holders (by burning the newly issued coins), so that one is a “no-op”.
The remaining combinations are:
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The consensus rules can take value from all coin-holders (issuance) and send it to miners. That’s mining rewards.
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The consensus rules can take value from all coin-holders (issuance) and send it to hard-coded addresses. That’s what we use currently for the Founders Reward.
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The consensus rules can take value from transactors (transaction fees) and send it to miners. That’s how transaction fees currently work in Bitcoin, Ethereum, and Zcash.
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The consensus rules can take value from transactors (transaction fees) and send it to holders (by burning it). That’s one of the ideas for a future fee market design that Vitalik Buterin has proposed for Ethereum (EIP-1559: Fee market change for ETH 1.0 chain - EIPs - Fellowship of Ethereum Magicians) and Zcash (Evaluate alternative transaction fee market mechanisms · Issue #3473 · zcash/zcash · GitHub).
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The consensus rules can take value from transactors (transaction fees) and send it to some hard-coded addresses. That’s one of the proposals I’ve heard for future Dev Funding in Zcash and in Ethereum.
Now, given that there are only two sources of value that the consensus rules can use to fund developers, which one should the consensus rules use, or both?
Historically — for the first ten years of Bitcoin, the first four years of Ethereum, and the first two and a half years of Zcash — the value of coming from holders (new issuance) is much, much greater than the value coming from transactors (transaction fees). Currently according to https://messari.io/onchainfx/view/14D4860B (see screenshot below), BTC has $18M/day issuance and $1.5M/day fees. ETH has $3.6M/day issuance and $175K/day fees. ZEC has $600K/day issuance and $81.00/day fees.
Hope this helps! I think your question is a very common question so I’m glad you asked.
Regards,
Zooko
