Another way to look at issuance

Many people asked why ETH burn transaction fees and why no supply cap. Here is another way to look at it that might make more sense.

Blockchain needs to pay stakers (or miners) in order to stay secured. In society what we do is, everybody pay taxes, those tax money goes to public goods providers, in this case stakers. This is actually doable in blockchain. For example, we can make every address with nonzero ETH automatically lose 1% of their ETH each year, and distribute those ETH to stakers. We can smooth it to 0.0027% a day or 0.00000038% every 12 seconds. With this protocol, ETH will have a supply cap, but everyone slowly lose ETH over time. However, it is computational costly. If there are 1 billion addresses with nonzero ETH, there will be 1 billion transactions every time the blockchain collect taxes.

Is there a better way to do this? Yes, we can just print 1% of the supply and give it to stakers. Supply increased by 1% means every ETH lost 1% of its value (actually 0.99%), and those lost value goes to stakers. Isn't this exactly what the taxing model was doing? but with much less computations?

So issuance is equivalent to taxing every holders. It is just displayed in a different form. Whether you like to see your account balance stays the same and the total supply moves, or your account balance moves and the total supply stays the same. The effects are the same.

If issuance is taxing, fee burning is tax refund. What happens when the public goods are very popular and people have to pay to use it? Government makes money. Since they are already paid with taxes, they should distribute the revenue to the citizens.

Like with taxing, we can distribute the fees into billions of addresses, or we can just burn it and make every ETH slightly more valuable. They are the same thing in different forms. So there you have it. Uncapped issuance is taxing, fee burning is tax refund. Issuance adjustment is tax rate adjustment. When the government makes more money, everyone get more tax refund. When the blockchain get more fees, everyone get more deflation.