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title: Response to Gavin

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# Response to Gavin
> if rampant issuance is the issue, could issuance for infra be scaled back? then develop new revenue source(s) that help sustain infra, and gradually taper off the new issuance entirely
>
> i may be missing something, but for me, a trend of emissions decreases would inspire more confidence in holding the asset than a capped infra budget would (esp via rebase, bc rebase just seems to make things unintuitive for token holders)


I think the original proposal is worth reading in detail: https://0l.network/2022/10/11/proposal-2210-1-final-supply/


## 0L Looks different, because it is different
Certainly I think a number of things we are proposing will be unfamiliar to crypto natives. I think this will be a side-effect of actively trying to distance ourselves from scams.

I think that all crypto projects are dishonest about their economics. Without exception.

If we actually care about selling an honest product to the mainstream (who actually worked for their money) we need to start at first principles of economics. It's clear this will come into conflict with how the past blockchain generation thinks about value, but will be for the benefit of future generations.

This is a good thing. This is our brand.

## Our Biggest Opportunity
"Rampant inflation" is not the issue Final Supply solves. Free mining blockchains have high inflation during bootstrapping, we chose this. To your point, it can just be turned off.

When we talk about Final Supply being our biggest opportunity, I don’t think this is an overstatement. This will bring our economics into line with uncontroversial understandings of equity.

## Radically Honest
The TL;DR of the final supply opportunity is: every validator, worker, or purchaser of coin can only have their share of the network increase over time. Really. 

This is powerful. When you couple this with dividends or buybacks tied to real economic activity (burns from more revenue sources). Everyone will receive an increasing dividend over time. 

This is explosive. And it has the benefit of being honest and easy to communicate.

## Fully Diluted is the Norm
In the real world, with real equity, mature public companies are fully diluted. Growing companies issue capital for large projects. But these are exceptional cases, there is no daily issuance of new equity.

Startups are slightly different, but most statutes are designed so that stakeholders know exactly what they have, and exceptionally that any new issuance is creating new capital (CAPEX), not just funding expenses (OPEX).

Issuance to pay miners does not create capital. It is paying operational expenses, read more about the difference of [CAPEX and OPEX](https://www.investopedia.com/ask/answers/112814/whats-difference-between-capital-expenditures-capex-and-operational-expenditures-opex.asp).

Because they need to know what they have, and what new issuance buys, VC investors only invest in startup companies that have a credible and sufficient “employee stock options pool”. These are the shares used to tempt early employees. The pool exists BEFORE investors join because allowing the company to issue new shares indefinitely to cover recruiting is a risky proposition. Otherwise you can never know the value of your shares on a given day, and you never know what you are getting for the new capital. This is uncontroversial and uniform in startups all over the world.

Final Supply creates the stock options pool for validators.

## Voodoo
One thing that puzzles smart economists about blockchains is that all the transaction fees AND all future capital issuance is a title to the validators. They'll say: You can't grow communities if your capital is a property right of the security guards of the network.

But that's because they don't understand how ecosystems actually have got capitalized: pre-mines. 

When you look under the cover, all blockchain projects have capital from VCs to sponsor an ecosystem including infrastructure, apps, exchanges etc. That usually comes out of a pre-mine, so that it doesn’t come out of future issuance (so it doesn't dilute the VC).

With corporate, VC funded chains what happened was the majority of the equity was already mostly fully diluted, the remaining small amount of capital is just there to supposedly pay for security (but we know that in POS it's just to pay back capital, but I digress). The whole thing is a voodoo ritual to make "value" appear.

## 0L is mostly there
We shouldn't do this for VCs, we should do it for everyone, today, and in the future of 0L.

Despite our self-imposed difficulties (no pre-mine, free mining, no VCs, no foundation), we remarkably have capitalized the important CAPEX stuff: Community Wallets.

This was a first step. So that we wouldn’t have to introduce new issuance in the future for growth activities.

This is a great success. The next step is doing the same for validator rewards.


## The alternatives are misleading
So yes I agree with you that people want certainty. But familiarity is not the same as certainty. I disagree that an issuance schedule that decays like Bitcoin, is functionally better, or easier to understand (besides to crypto natives).

First, with a decaying schedule you have the same potential problem as an escrow fund. It will exhaust. And then you’ve kicked the future funding of this to a governance problem down the road (which Bitcoin will also have). So let’s rip the bandaid now, in a one-time event.

But both an escrow fund, and a decaying curve need to be backstopped.

## Backstopping

What we do need more clarity on is: what happens if the escrow fund runs out before expected? Well I think it should be specific to each chain. In 0L I would say it should come out of the other capital of the network: Community Wallets. I’m not sure this is a generalizable solution, but I think it works nicely with 0L. Another thing is that we could already start thinking of Community Wallet as a product, meaning, we could charge those accounts a fee. And this would make the escrow fund last longer.

## There's more work to do
The proposal above is a principle, not a final design.

In short there’s a design space here that needs to be developed, not only for us, but for the entire industry.

## PS. Ignore Rebasing
Last point, rebasing is orthogonal to all this. It’s not necessary. It’s just palliative.

We can a) fund the escrow by growing it over time, and then declaring final supply, or b) create in a one-time event.

A one time event where people end up with less coins in the wallet will be very difficult to explain to people not following the rationale. There will be a riot. So rebasing would be seen as psychologically better.

But it risks being deceptive. So I don’t think it’s an obviously correct thing to do. But again, this potentially unrelated to Final Supply, or an implementation detail of.

## The only question to answer:
"What would the most loved token of blockchain do?"