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EffortCapital and Westie, Blockworks research analysts join Dan and Sam to cover Uniswap Foundation's funding request, Arbitrum grants program, dYdX incentives. They discuss token issuance as a cost in blockchain protocols and analyze Coinbase's retail perps launch and international expansion.
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Quick takeaways
- In proof-of-stake systems, the issuance of new tokens is considered a cost as token holders often need to sell tokens to cover expenses like hardware costs and taxes on income.
- Inflation affects the net change in inflation or deflation as transaction fees generate revenue for the protocol, but being a profitable blockchain is not the sole determinant of sustainability.
Deep dives
Issuance as a Cost to the Network
Issuance of tokens in a blockchain network is a cost to the network. From an income statement perspective, transaction fees are revenue for the network, and a portion of these fees, along with newly created tokens, are used to pay for the service of block creation and network security. Opting into receiving inflation doesn't make it a closed loop system, as holders need to sell tokens to cover expenses like hardware costs and taxes on income. In proof-of-work systems, paying miners is an expense that leaves the system. In proof-of-stake systems, the debate is whether it is a cost or not, but taking a business perspective, it's considered a cost. Inflation affects token prices and impacts value transfer from holders to stakers.
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