• Demand-dependent Monetary Policy without Hyperinflation Not a suggestion for Bitcoin.
  • Abstract This article describes a simple monetary rule for a new cryptocurrency. The system mints a fixed amount on a fixed schedule: 10 coins every 10 minutes. Each block earns transaction fees; half of the total fees are paid to the miner, and half of the fees are burned to remove money from circulation. Issuance is constant. Removal scales with actual usage. When activity is high, removal rises and supply growth slows or turns negative. When activity is low, removal falls and issuance dominates. The rule operates automatically and does not rely on periodic parameter changes.
  • Comparison with Satoshi’s 21M, Halving Schedule ⚖️
  • The Monetary Rule 📜
  • Demand-dependent Homeostasis ⚙️ Inspired by Satoshi’s difficulty adjustment algorithm and biological feedback loops, applied to economic activity.
    • The Arithmetic at Different Fee Levels The rule is always the same: mint 10 coins, burn half the fees. Different outcomes emerge from different activity levels:
    • Phase 1: Low Value → Deflation
    • Phase 2: High Value → Inflation
    • Phase Ad Infinitum: The Perpetual Cycle
    • The Biological Analogy Like body temperature regulation or circadian rhythms, the system senses deviation (via fee levels reflecting economic activity) and responds automatically (via burning half of all fees). Since inflation leads to larger fees due to lower coin value, burning half the fees during inflated times will lead to much more of the supply being destoryed than burning fees during deflated times where fee sizes are lower due to higher coin price. No committee votes. No governance or changing schedueles. The protocol itself is the thermostat.
  • Why this helps with centralization risk 🧱
    • The Fee-Only Mining Problem When block rewards approach zero (as in Bitcoin’s long-term model), miners depend entirely on transaction fees. This creates a dangerous feedback loop during low-activity periods:
    • How Constant Base Issuance Addresses This The 10 coins per block creates a permanent revenue floor:

§Demand-dependent Monetary Policy without Hyperinflation Not a suggestion for Bitcoin.

§Abstract This article describes a simple monetary rule for a new cryptocurrency. The system mints a fixed amount on a fixed schedule: 10 coins every 10 minutes. Each block earns transaction fees; half of the total fees are paid to the miner, and half of the fees are burned to remove money from circulation. Issuance is constant. Removal scales with actual usage. When activity is high, removal rises and supply growth slows or turns negative. When activity is low, removal falls and issuance dominates. The rule operates automatically and does not rely on periodic parameter changes.

§Comparison with Satoshi’s 21M, Halving Schedule ⚖️

• Supply shape (pure Austrian): Bitcoin targets a fixed cap of 21M with scheduled halvings that eventually end. Scarcity is pre-committed; issuance trends to zero.
• Security budget risk: As the subsidy winds down, miners must live on fees. If fees aren’t high or frequent enough for long stretches, total miner profit can fall. That squeezes smaller miners first and can push toward miner centralization.
• This rule (constant issuance): Keep a small, permanent base—10 coins every 10 minutes—so there is always a floor under miner income. Blocks still earn transaction fees; exactly half of the block’s total transaction fees are burned to remove from circulation, the other half are paid to the miner. Usage decides how much of that base is offset, without relying on a halving calendar.

§The Monetary Rule 📜

• Issuance: mint 10 coins per block.
• Fees: users pay; each block earns transaction fees.
• Split: exactly half of the block’s total transaction fees are burned to remove from circulation; the other half are paid to the miner.

§Demand-dependent Homeostasis ⚙️ Inspired by Satoshi’s difficulty adjustment algorithm and biological feedback loops, applied to economic activity.

The system creates a self-correcting cycle that resists both runaway inflation and extreme deflation:

§The Arithmetic at Different Fee Levels The rule is always the same: mint 10 coins, burn half the fees. Different outcomes emerge from different activity levels:

• Block earns 33.16 coins in fees: Minted: +10 | Burned: 16.58 | Net supply: −6.58 coins (deflationary) Miner income: 10 + 16.58 = 26.58 coins

• Block earns 5 coins in fees: Minted: +10 | Burned: 2.5 | Net supply: +7.5 coins (inflationary) Miner income: 10 + 2.5 = 12.5 coins

• Block earns 25 coins in fees: Minted: +10 | Burned: 12.5 | Net supply: −2.5 coins (deflationary) Miner income: 10 + 12.5 = 22.5 coins

The protocol applies the rule at every block, potentially mitigating volatility.

§Phase 1: Low Value → Deflation

When the coin is cheap:

• Users transact freely. Coins are affordable, fees feel negligible.
• High transaction volume → blocks consistently earn 40+ coins in fees.
• Burning: Half of 40 = 20 coins removed per block.
• Minting: 10 coins added per block.
• Net effect: Supply shrinks by ~10 coins per block.
• Miner income: 10 + 20 = 30 coins per block.
• Result: Scarcity increases → coin value rises → moves toward Phase 2.

§Phase 2: High Value → Inflation

When the coin is expensive:

• Users transact conservatively. Coins are costly, fees feel significant.
• Low transaction volume → blocks earn only 5 coins in fees.
• Burning: Half of 5 = 2.5 coins removed per block.
• Minting: 10 coins added per block.
• Net effect: Supply grows by 7.5 coins per block.
• Miner income: 10 + 2.5 = 12.5 coins per block.
• Result: Abundance increases → coin value falls → moves toward Phase 1.

§Phase Ad Infinitum: The Perpetual Cycle

The system oscillates between Phase 1 and Phase 2 indefinitely:

• Phase 1 deflation raises value until activity cools.
• Phase 2 inflation lowers value until activity heats up.
• Neither extreme can persist—each contains the seeds of its own reversal.
• The cycle continues without human intervention, driven purely by usage patterns responding to price signals.

§The Biological Analogy Like body temperature regulation or circadian rhythms, the system senses deviation (via fee levels reflecting economic activity) and responds automatically (via burning half of all fees). Since inflation leads to larger fees due to lower coin value, burning half the fees during inflated times will lead to much more of the supply being destoryed than burning fees during deflated times where fee sizes are lower due to higher coin price. No committee votes. No governance or changing schedueles. The protocol itself is the thermostat.

This computationally prevents hyperinflation (constant issuance can’t run away because burning scales with usage) while mitigating the boom-bust volatility that fixed-supply systems experience.

§Why this helps with centralization risk 🧱

§The Fee-Only Mining Problem When block rewards approach zero (as in Bitcoin’s long-term model), miners depend entirely on transaction fees. This creates a dangerous feedback loop during low-activity periods:

1. Revenue collapse: Transaction volume drops → fees plummet → miner income falls below operational costs.
2. Small miner exodus: Miners with thin margins shut down first. They can’t afford to run at a loss waiting for activity to return.
3. Hashrate concentration: As small miners drop out, hashrate consolidates among large operations with deeper pockets and economies of scale.
4. Hyperinflation prevention: Half of all fees are burned to prevent long-term hyperinflation, ensuring miners always get some fees and a full block reward for every block they mine for the rest of time.

The security of proof-of-work relies on broad hashrate distribution. Fee-only mining undermines this during inevitable low-activity periods.

§How Constant Base Issuance Addresses This The 10 coins per block creates a permanent revenue floor:

• Survival through downturns: Even when fees drop to near-zero, miners still earn 10 coins. Small operations can stay online.
• Sustained decentralization: Miners don’t need deep reserves to weather quiet periods. Entry barriers stay low.
• Attack cost stability: The cost of a 51% attack remains tied to total hashrate, not just to current transaction volume.
• No fee dependency crisis: The network’s security doesn’t hinge on hoping transaction demand stays perpetually high.

During high-activity periods, fees still dominate miner income (10 base + substantial fee share). During low-activity periods, the base prevents the hashrate collapse that centralizes control. The system maintains security across the full economic cycle.