ETH researcher: The current Ethereumissuance curve is a trap and should adopt the 'bull horn bread' model

The current issuance of ETH rises by 0.5% annually. That is, the annual issuance of 1% minus the annual destruction of 0.5%. To achieve excess returns again, either the issuance needs to decrease or the destruction needs to increase. Personally, I believe both will happen. This article is based on an article written by Justin Drake, a researcher at the Ethereum Foundation, and compiled, translated, and written by PANews. (Background: Tether: Quantum computers are far from breaking BTC! But Satoshi Nakamoto's 1 million BTC is at risk in the future) (Background: The Central Bank of Poland: Absolutely refuses to include BTC in national reserves, BTC volatility is too high, hiding huge uncontrollable risks) Before delving into Ethereum's issuance and destruction, let's briefly introduce ETH and BTC. The native Internet coin is a huge opportunity worth tens of trillions of dollars. There is little accumulation of premium coins on a large scale. You need a truly attractive asset with outstanding attributes for social coordination. At first glance, the nature of the coin is a zero-sum game. In the Internet era, gold has prepared for demonetization. Only two candidate coins can replace it and win the battle for Internet Currency - BTC and ETH. No other coin can compete with them. I believe the decisive factors are credibility, neutrality, security, and scarcity. Since the Ethereum merger, ETH is scarcer than BTC. It is worth noting that BTC's supply has risen by 666,000, valued at 66 billion USD, while ETH's supply has remained stable. Currently, BTC's supply rises by 0.83% annually, 66% faster than ETH. For those looking to the future, ETH's supply will decrease again. Scarcity is crucial, but ultimately, the battle for Internet Currency may be resolved by security. Ironically, the famous 21 million BTC limit is to blame. BTC issuance will drop to zero - this is the most powerful social contract of BTC. After several Halvings, issuance will become insignificant. In the past 7 days, only 1% of Miner income comes from BTC fees, and 99% comes from BTC issuance. Despite experiencing 4 Halvings, issuance has decreased 16 times, and despite spending 15 years searching for BTC's utility, the situation remains the same. Personally, I think the BTC blockchain is outdated. It would take about 10 billion USD and 10 GW of power to sustain a 51% attack on BTC. For nation-states, the cost is negligible. As for power, Texas can produce 80 GW. BTC's security ratio is 200 to 1, safeguarding a 2 trillion USD asset with 10 billion USD of economic security. Any tools related to BTC Mining will incentivize a 51% attack. BTC mining stocks worth 20 billion USD - these stocks will immediately trigger a 'nuclear explosion.' BTC's open Position contracts amount to 40 billion USD - directly shorting the Position. Not to mention the potential short Position generated by 100 billion USD of ETFs and 100 billion USD of MSTR. Can BitVM solve the cost issue? Any BitVM bridge is an incentive for a 51% attack on BTC. In fact, a 51% attacker can review fraud proof during the challenge period and deplete the BitVM bridge. Ironically, BitVM can be considered a direct attack on BTC. If BTC's price rises by 10 times, surpassing gold, will BTC still be safe? Assuming this scenario occurs within the next 11 years. BTC will become a 20 trillion USD asset, but due to three Halvings, issuance will decrease 8 times. The security ratio will exceed 1000 to 1. I believe this is unsustainable, especially as BTC becomes institutionalized, Liquidity becomes stronger, and shorting becomes easier. Imagine 1 trillion USD of perpetual open Position contracts with only 100 billion USD of economic security. Can BTC somehow self-repair before it's too late? BTC is a epitome of a stagnant blockchain. Can it have a 1% tail issuance annually? Perhaps BTC can switch to PoS and rely on minimal fees? PoS is sacrilegious. Maybe BTC can switch to another PoW algorithm? No, that nuclear option is useless. Perhaps BTC can have large Blocks and sell data availability on a large scale? Well, there was once a holy war over small Blocks. If you've read this far and understood the above content, congratulations. Even today, few realize the long-term impact of BTC PoW and its effect on BTC assets. This is an opportunity to seize, but it requires patience. It's not a month, not even a year - it's 10 years. In terms of a long-term framework, Lummis's suggestion to lock BTC for 20 years is a bit crazy - by then, BTC will be obsolete. What's worse, if the US holds trillions of USD worth of BTC, it will directly incentivize the US's enemies to launch a 51% attack. Contrary to popular belief, BTC has no resistance to nation-states - countries like Russia can easily launch a 51% attack. ETH issuance Returning to ETH. The current issuance curve is a trap. Unfortunately, just like BTC's issuance, Ethereum's issuance design is also flawed. It guarantees a 2% tail APR even if 100% of ETH is staked. Since the cost of staking is far below 2%, every rational ETH holder is incentivized to stake. When the majority of ETH is staked, losses will occur: → ETH Replacement: Liquid stake coins like stETH and cbETH replace original ETH as Collateral. This injects systematic risks into Decentralized Finance (custodial risk, slashing risk, governance risk, smart contract risk). This replacement will also weaken ETH's role as a unit of account and further react to premium coin demonetization. → Actual profit and tax rate: Actual profit, adjusted based on the rise in supply, decreases as ETH staking increases. When 100% of ETH is staked, all ETH holders will be equally diluted. Worse, income tax is levied based on nominal income. If non-stakers enjoy positive actual profits and all ETH holders bear billions of USD of pressure annually, it will be a tragedy. I believe the issuance curve should be driven by stakeholder competition to discover a fair issuance rate - rather than arbitrarily setting a 2% minimum. This means that as ETH staking increases, the issuance curve must eventually decline and return to zero. My suggestion is 'Croissant Issuance.' 'Croissant Issuance' is a simple semicircular shape with two parameters: → Soft Cap: The stake ratio when issuance drops to zero. A 50% stake soft cap feels credible, neutral, and practical. → Peak Issuance: The theoretical maximum issuance that ETH holders bear. Any arbitrary integer (e.g., 1% annually) is sufficient, as the final rate will be determined by the market. Ethereum Foundation researchers have been studying issuance for many years...