Four Years of Tail Emission

Today, June 9th, is Happy Tail Emission Day! On this day in 2022, Monero's original decreasing emission curve ended and at 00:28:57 UTC the tail emission came into effect. Four years ago now. Congratulations to the entire community, to the developers, the miners and the users.

But what exactly is this all about?

What is Tail Emission?

A brief introduction for anyone who knows Monero only as that privacy-focused cryptocurrency and happened to land here.

In so-called Proof-of-Work blockchains (PoW), users secure the network with computing power. Computationally intensive work is performed to earn the right to confirm transactions and bundle them into blocks - in return they receive a reward. On one hand that is the so-called block reward: freshly minted coins, and on the other hand on top the transaction fees of the transactions included in the block. This process is called mining, because new coins are created through work, mined like gold.

The problem with many blockchains, however, is that they have a maximum number of coins ever to be created anchored in the protocol. To delay reaching the last coins and to reflect value growth through increasing scarcity of new coins, the emission curve of such cryptocurrencies is a descending curve. The block reward either reduces periodically or gradually approaches zero. At some point the maximum of coins to be issued is reached and no new coins are created. The block reward that miners earn is then replaced by transaction fees.

Monero is similar, but with one crucial difference: once the block reward reaches 0.6 XMR, it stays there. Permanently. That is the tail emission we are celebrating today. This point was reached 4 years ago and since then there has been a permanent minimum block reward of 0.6 XMR per block, plus transaction fees for the miners.

Why does this matter?

Imagine you work in a mine. The ore vein you are working is finite. At some point it runs dry. What then? What do you do when the income disappears - do you turn off the lights? Do you offer your services elsewhere?

That is exactly what happens with miners when the block reward disappears or is too low. For network security this is not an abstract danger but a real, structural problem. The hashrate - the total computing power the network brings to bear - is directly proportional to the security of the network. With a falling hashrate the network becomes more vulnerable to attacks, in particular so-called 51% attacks, where a small group or even a single actor controls the majority of the computing power in the network and can therefore censor or manipulate transactions.

The argument that "transaction fees will sort it out" sounds good in theory. In practice, fees are volatile, dependent on network utilisation, and historically at most networks nowhere near sufficient to motivate miners long-term - at least not enough to maintain the security level you would expect from a serious store of value or a privacy-first protocol. On top of that, with the block reward gone, fees will rise so that miners can make a living. With rising fees we risk fewer transactions being made. A downward spiral sets in.

That is why Monero has imposed a tail emission on itself, so that even blocks with few transactions still always reward the miner.

Is this not just inflation?

Yes. But! The technically correct answer is: yes, the tail emission means that the XMR supply is technically unlimited. Approximately 18.4 million XMR were created in the phase before the tail emission. With the tail emission, around 158,000 new XMR are added each year.

Sounds like a lot? Quick calculation: 158,000 out of today's approximately 18.44 million is less than 0.86%. And that percentage shrinks continuously, because the nominal emission amount stays the same while the total supply grows. Long-term the percentage inflation tends toward zero, and even if zero percent inflation is never actually reached, we are talking about a disinflationary inflation where the rate approaches zero asymptotically.

That is considerably more moderate than what many non-crypto currency systems worldwide operate as money supply growth. The inflation is given, known, plannable and above all decreasing.

Other cryptocurrencies celebrate their hard cap as brilliant scarcity. What comes after, when the last coin is mined and miners are supposed to live on fees alone, remains an unresolved security risk whose consequences nobody can predict.

Monero has answered that question for itself. The tail emission works. And has been working successfully for four years now.

To celebrate the day

Last weekend Monerokon took place and ArticMine, anhdres and several others wore the Tail Emission Day T-shirt. Even though it is too late this year to get it onto T-shirts, I would still like to officially release this design today under the GPL.

	No transparency, for any background With transparency for dark backgrounds With transparency for light backgrounds

Put it on every conceivable piece of merch, rework it, and wear it with pride at and around the next Monero Tail Emission Day.

With that in mind

Happy MTED26 everyone.

Peace out Alexander