We have already decided to use mining to release new coins for the users of our money and to ensure some scarcity so that our money doesn’t become eventually worthless.
But why don’t we just release all the coins at the beginning and call it a day? Well, let’s think it through, there are two main reasons: one is security. Remember that we’re using the newly minted coins to pay those miners to maintain the security of the network. Without the incentive of earning money, there would only be altruistic miners, which is not a super sustainable plan.
The second reason is fairness. If we release all the coins at once, who are we giving them to? Let’s say there are 10 of us creating the money, and we share all the coins between us. What would be the incentive for someone else to buy our coins to use them, since we hold so many of them? We’d be eternally richer than everybody else, which would look (and sincerely be) pretty unfair. And when people feel a game is unfair, they don’t want to play. The only unfair games that people take part of are those where they’re forced to play, like the current banking system. We’re trying to create something better here.
Again, incentives. We need as many people as possible to adopt out money for it to grow in value (it buys more things per coin and it’s accepted by more people). So the plan is to release the new coins progressively over time. And one smart way to do it is to release more coins at the beginning and a bit less and a bit less over time. Why’s that? Again, balance of incentives. When our money is new and not many people use it, it’s less useful, it’s more of a risky bet, because it hasn’t proved itself by a track record of being good money for years and used by millions. So, for those persons willing to exchange other moneys for ours, or willing to spend electricity mining it, when it’s still very early, we give them more coins. As time progresses and more people get on board, we give everybody less and less. It makes sense.
When we draw this in a graph, it looks like a curve. People call this the emission curve. At the bottom left no time has passed and no coins are minted. As we move to the right, time goes by, and the amount of coins in someone’s hands increases, fast at first, slower afterwards.
What happens when we reach the top right corner? In that moment, all the coins are out there and there are no more left to reward miners. Bitcoin for example works like this. But there’s another way, we can add a 2.40-tail_emission.