In blockchain design, few concepts generate as much debate as supply issuance. Bitcoin's fixed cap of 21 million coins, for example, is often seen as a symbol of scarcity and sound monetary policy. However, as block rewards dwindle, questions about long-term sustainability become increasingly relevant.

One solution that has gained attention is tail emission – a mechanism where a small, constant amount of new coins are issued indefinitely. But this idea, while simple in theory, has complex implications. Some chains have tried it, others have rejected it. Alephium, a performant and scalable layer-1, has adopted tail emission – not as an afterthought, but as part of a deeper economic architecture.

This article explores the rationale behind tail emission, how it has been used by other major chains, and why Alephium’s approach may offer a compelling and sustainable alternative.

But First, What Is Tail Emission?

Tail emission refers to a design where the blockchain continues to issue a fixed or predictable amount of new coins, even after the initial supply schedule has run its course. The purpose is straightforward: to ensure that network validators or miners are continuously incentivised to secure the chain, without relying solely on transaction fees.

Tail emission is not just about keeping miners engaged. It addresses a deeper economic challenge. In a system with a hard cap, once all coins are distributed, there are only two ways to pay for security:

High and growing transaction fees
External subsidy or donation

Neither is ideal. High fees deter usage, while external funding breaks decentralisation. Tail emission provides a third option – a modest, predictable inflation that funds security without penalising users.

Bitcoin: The Hard Cap Dilemma

Bitcoin's monetary model is built around scarcity. With a total supply capped at 21 million BTC and a halving event every four years, its inflation rate decreases over time and will eventually reach zero.

This hard cap is central to Bitcoin’s identity. It has helped establish trust, attract investors, and distinguish Bitcoin from fiat currencies. Yet, it also introduces a structural risk.

As block rewards diminish, Bitcoin miners must rely increasingly on transaction fees to justify their energy expenditure. This creates pressure for fees to rise, potentially pricing out everyday users and small transactions. Worse, if fees are insufficient, miners may drop out, leading to reduced hash rate and a less secure network.

Bitcoin postpones this problem to around the year 2140. But the underlying economic challenge remains unresolved.

What About Bitcoin’s Scaling Solutions and Future Prospects?

Bitcoin supporters often cite ongoing developments such as:

Lightning Network for fast, off-chain payments
Sidechains like Liquid or RSK for programmability
Fee markets expected to mature as adoption grows
A growing body of Bitcoin Improvement Proposals (BIPs)

These are promising directions, particularly in addressing Bitcoin’s scalability challenges. However, they introduce a structural trade-off:

The more activity moves off-chain, the less fee revenue remains on the base layer, where miners secure the network.

Meanwhile, sidechains often rely on trusted setups, while fee markets remain unpredictable and volatile. Crucially, Bitcoin’s base protocol is intentionally conservative, making significant monetary or structural changes extremely difficult to implement.

This rigidity has already led to multiple contentious forks, such as Bitcoin Cash, Bitcoin SV, and others, which failed to gain lasting adoption or technical momentum.

Monero: Early Adoption of Tail Emission

Monero has taken a more proactive approach. In 2022, after reaching approximately 18.4 million XMR in circulation, it entered its tail emission phase, issuing 0.6 XMR per block indefinitely.

This mechanism ensures that miners are continuously incentivised, regardless of transaction volume. The network maintains low and predictable fees while preserving long-term security.

The model offers several clear advantages:

Predictable inflation that diminishes over time as total supply increases
Stable miner incentives without burdening users with high fees
Economic sustainability aligned with long-term viability

While Monero’s tail emission is technically set at 0.6 XMR per block, it may decrease slightly due to block size penalties. However, this adjustment is not responsive to network demand, hash rate, or broader market conditions. It is a deterrent against excessive block sizes, not a dynamic monetary mechanism.

As a result, Monero’s emission model remains largely static. It guarantees predictability, but offers limited flexibility. If XMR’s price were to decline substantially, the fixed reward may lose economic viability for miners. In such cases, higher transaction fees might be required to compensate, reintroducing the very pressure that tail emission seeks to prevent.

In effect, Monero prioritises simplicity over adaptability. It offers long-term continuity but leaves limited capacity to respond dynamically to shifting economic conditions.

Ethereum: Is Quasi-tail Emission Good Enough?

Since the Merge in 2022, Ethereum has transitioned from PoW to a PoS consensus model, accompanied by a flexible issuance schedule. Validator rewards now depend on the total amount of ETH staked and the overall level of network activity.

With EIP-1559, Ethereum introduced a partial burn mechanism that destroys a portion of transaction fees. During periods of high usage, this can result in net deflation – where more ETH is burned than newly issued. Conversely, during periods of lower activity, issuance may exceed burns, resulting in mild inflation.

Ethereum is often regarded as having a quasi-tail emission model, where issuance is continuous but indirectly managed through market dynamics rather than protocol-enforced rules.

However, the system presents certain limitations:

There is no predictable or stable emission floor
Security and economic alignment depend heavily on staking participation and yield attractiveness

In practice, validator income is partly derived from transaction fees. During high-demand periods such as major NFT drops or protocol launches – gas fees can rise sharply, at times exceeding hundreds of dollars per transaction. This not only creates barriers for average users but also incentivises fee volatility, as validators benefit from network congestion.

Moreover, PoS introduces additional concerns around decentralisation. Becoming a validator requires staking a substantial amount of ETH, which tends to favour large holders and institutional actors. This concentration of stake can lead to power imbalances, reduced censorship resistance, and increased risks of coordinated manipulation.

While Ethereum is clearly moving in a deflationary direction, it does not offer the same level of consistency, predictability, or neutrality that tail emission advocates typically seek. Its monetary design remains reactive and economically complex, rather than governed by simple, protocol-driven rules.

Alephium: A Dynamic Deflationary Tail Emission Upgrade

With the Danube Network Upgrade on Mainnet on 15th July 2025, Alephium introduces tail emission as part of a cohesive economic architecture. Unlike other networks that adopt tail emission in isolation, Alephium embeds it within a broader design focused on scalability, deflation, and sustainable security.

All Transaction Fees Are Burned:

Alephium does not reward miners with transaction fees. Instead, 100% of fees are permanently destroyed, creating a direct, protocol-level deflationary pressure. As network usage increases, so too does the amount of ALPH removed from circulation.

Burn to Mine with Proof of Less Work:

Alephium pioneers Proof of Less Work (PoLW), a consensus mechanism that:

Reduces energy consumption compared to traditional PoW
Requires miners to burn ALPH to mine ALPH

This introduces an intrinsic cost to mining, creating a built-in monetary sink. Unlike typical PoW chains, mining on Alephium inherently offsets part of its own inflation.

Adaptive Block Rewards:

Alephium’s block rewards are not fixed, but follow a dynamic curve defined as the minimum of two factors:

A time-based emission schedule that gradually decreases
A hashrate-based schedule that responds to mining intensity

When network hashrate declines, the protocol increases block rewards to preserve mining participation and ensure baseline security. Conversely, when hashrate rises, which often reflects increased market interest, the emission curve contracts accordingly to prevent excessive inflation.

This adaptive mechanism enables Alephium to dynamically align issuance with actual security requirements. It operates independently of speculative cycles or transaction fee markets.

Smart Contract Deposits:

Deploying smart contracts on Alephium requires depositing ALPH. These deposits are locked for the lifetime of the contract, effectively removing that portion of ALPH from active circulation.

The growing presence of smart contracts contributes directly to increased network activity.

The more smart contracts exist, the greater the transaction demand, and the more ALPH is burned through fees.

In addition, many applications in the ecosystem (such as lending platforms, staking services, or gaming infrastructure) and protocol-level staking require ALPH to be staked or deposited in order to access their features.

DeFi, GameFi, RWA, and DePIN often require users to commit ALPH to participate, further reducing circulating supply and increasing long-term demand.

This architecture supports the rise of a real-world service economy, where ALPH is not just a speculative asset but a functional economic unit. The result is a self-reinforcing economic loop that aligns protocol utility with token value, creating a sustainable foundation for the network’s long-term health.

Supply Breakdown

To ensure consistency with CoinMarketCap’s methodology, Alephium adopts their terminology when reporting supply figures. This allows Alephium to be correctly represented on external platforms while also providing the community with additional context.

Circulating Supply: Circulating Supply is the best approximation of the number of assets circulating in the market and the general public’s hands. Are not part of the Circulating Supply ALPH that is locked (via smart contracts or legal contracts), allocated to the team or private sale participants, or in Ecosystem/Bounty/Marketing initiatives.
Total Supply: This is the number of ALPH in existence today. Basically, the sum of the initial supply (minted at genesis block = 140M ALPH) plus the ALPH mined until today, minus the ALPH burned.
Maximum Supply: Since the Danube upgrade, ALPH emissions are no longer capped and the supply is unlimited. However, the original emission curve remains unchanged for the first 80+ years, after which a modest tail emission begins. This ensures long-term security incentives without altering short- or medium-term supply dynamics.

→ Circulating Supply ≈ Total Supply − locked emissions − locked/vesting allocations (seed, ecosystem, treasury) − team/presale wallets − burned tokens.

Conclusion

Tail emission is often perceived as a fallback, serving to maintain security when transaction fees can no longer support miners. Alephium, following the Danube upgrade, reframes tail emission as an essential component of a unified economic architecture, built upon:

Sustained miner incentives that do not rely on volatile fee markets
A secure base layer maintained through dynamic, hashrate-aware block rewards
Supply responsiveness governed by an emission curve rather than fixed schedules
Protocol-level deflation driven by real usage and transparent fee burning
An energy-conscious consensus model that embeds monetary sinks directly into mining

Where Bitcoin remains rigid, Monero leans into predictability, and Ethereum grows increasingly complex and reactive, Alephium embraces adaptability. Here, tail emission is not a source of uncontrolled inflation. It acts as a calibrated response mechanism, continuously adjusting incentives in line with demand, usage, and network conditions.

This is not a compromise. It is a reflection of deliberate economic engineering. Alephium presents one of the most coherent and forward-thinking tokenomics designs among modern layer-1 blockchains. It stands as a serious contender in the ongoing conversation on long-term blockchain sustainability.

About Alephium
Alephium is the Layer 1 blockchain that combines built-in sharding with a Proof-of-Less-Work mechanism, enabling true scalability while preserving decentralisation.

Its unique sUTXO model delivers smart contracts that are both secure and flexible, while maintaining high performance and energy efficiency.

With the Danube upgrade, Alephium has reached speeds comparable to leading PoS networks without compromising on the principles of trust and security.

Alephium is building the operating infrastructure for decentralised finance and real-world applications: fast, secure, and ready for the future.

Official website: https://alephium.org

This is a community-run blog for third-party contributors. The views expressed here are those of the authors and do not reflect the official Alephium project. This content is for informational purposes only and does not constitute financial, legal or investment advice. Cryptocurrency carries risk and is highly volatile. Information may be incomplete or outdated. Always conduct your own research. We disclaim liability for any loss or damage resulting from reliance on this article.

Danube Upgrade Brings the Evolution of Tail Emission Economics to Alephium