Page 29

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8. Financials & Funding (continued)

B. Treasury Management

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"The Non-Existent Treasury: Bitcoin’s Self-Sovereign Approach to Capital Reserves and Sustainability"

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When analyzing the financial backbone of most blockchain projects, treasury management is one of the most critical indicators of long-term viability. Traditional token projects hold vast reserves of their native assets or fiat capital to fund development, marketing, and ecosystem growth. Treasury inflows are governed by token allocations, revenue, or fundraising proceeds. In Bitcoin’s case, however, this model simply does not apply.

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Bitcoin lacks a formal treasury altogether.

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This section explores how treasury principles are implemented differently in Bitcoin’s ecosystem—not through centralized capital reserves or a foundation-led endowment, but through decentralized network effects, external stakeholder financing, and the trustless structure of incentives inherent in Proof of Work.

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1. No Native Treasury: A Radical Economic Design

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Unlike modern Layer-1 protocols like Ethereum, Solana, or Avalanche, Bitcoin does not possess:

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A governing foundation holding BTC reserves

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A premine or developer allocation

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A centralized multisig fund treasury

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There is no “Bitcoin DAO” disbursing grants or voting on capital allocation. Instead, Bitcoin’s economic architecture delegates value distribution entirely to the protocol itself—through block rewards, mining incentives, and voluntary external funding.

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This lack of a traditional treasury is a design choice that reinforces decentralization, eliminates treasury attack vectors, and minimizes bureaucratic overhead.

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Sources:

https://en.bitcoin.it/wiki/Bitcoin#Economics

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https://bitcoin.org/en/how-it-works

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2. Block Rewards as a Network-Level “Treasury Flow”

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While there is no formal treasury, Bitcoin’s block subsidy functions as a decentralized, trustless treasury distribution mechanism. Every 10 minutes, 6.25 BTC (as of 2024; to be halved to 3.125 in April 2024) is minted and rewarded to miners, incentivizing network security and providing liquidity into the ecosystem.

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Unlike other projects where developers rely on treasury grants, Bitcoin Core contributors are externally funded and not protocol-subsidized, maintaining neutrality and reducing governance centralization.

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Key distinction:

In Bitcoin, capital is not hoarded in a treasury—it flows outward consistently and predictably via the protocol itself.

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3. Developer Sustainability: Ecosystem-Funded, Not Protocol-Funded

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Given the absence of treasury-based salaries or foundation grants, Bitcoin Core development relies on:

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Donations from corporations (e.g., Block, Coinbase, Gemini)

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Non-profit initiatives (e.g., Brink.dev, OpenSats, HRF)

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Community grants from infrastructure providers and mining pools

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This model keeps developer incentives aligned with protocol security, not capital distribution politics. It has also fostered a pluralistic funding landscape, where no single entity dominates developer compensation.

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Example Funding Initiatives:

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OpenSats.org: Public donation model to support Bitcoin development

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Brink.dev: Grant platform for full-time Core contributors

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HRF Bitcoin Development Fund: Human rights-focused support for censorship-resistant tools

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Sources:

https://opensats.org/

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https://brink.dev/funding

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https://hrf.org/devfund/

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4. Capital Efficiency: Bitcoin’s Treasury Through Incentives, Not Assets

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Bitcoin achieves capital efficiency not through retained earnings or a balance sheet, but through incentive design and protocol governance minimalism. Unlike projects needing tens of millions in treasury buffers for ecosystem maintenance, Bitcoin’s economic engine operates with:

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Zero discretionary spending

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Zero marketing budgets

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Zero employee overhead on the protocol level

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The incentives are baked into mining economics:

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Miners invest CapEx and OpEx into securing the network

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They are paid only for valid work (Proof of Work)

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The system self-adjusts through difficulty changes and halvings

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This mechanism ensures capital productivity without treasury reserves—a radically different but remarkably efficient financial architecture.

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Source:

https://www.bitcoinmining.com/what-is-bitcoin-mining/

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5. Reserve Risks and Contingencies: The Tradeoff of No Treasury

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While Bitcoin’s treasury-less model maximizes decentralization, it comes with tradeoffs:

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No protocol-controlled runway for critical upgrades

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No capital cushion during bear markets

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No fallback mechanism for catastrophic funding shortfalls

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Other projects (e.g., Ethereum Foundation or Solana Foundation) can deploy capital strategically during downturns to retain developers, fund new initiatives, or bootstrap activity. Bitcoin, by contrast, depends on community goodwill and market narratives to drive ongoing development momentum.

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This creates a unique systemic risk: if external funding dries up, there is no protocol-level safety net.

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Source:

https://ethereum.foundation/grants/

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https://solana.org/ecosystem/grants

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6. Custody of Bitcoin Ecosystem Reserves (Indirect Exposure)

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Though Bitcoin itself has no treasury, Bitcoin-aligned organizations do hold BTC as part of their reserves or operational strategy:

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MicroStrategy: Over 190,000 BTC on corporate balance sheet

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Tesla (initially): ~$1.5B worth of BTC (reduced later)

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Block (formerly Square): BTC on treasury for ideological and financial hedge purposes

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Bitcoin Mining Companies (e.g., Marathon, Riot): Retain BTC as treasury strategy

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While these holdings are not protocol reserves, they act as decentralized “treasury equivalents”, providing Bitcoin-aligned capital buffers in the broader ecosystem.

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Sources:

https://www.microstrategy.com/en/investor-relations/bitcoin

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https://www.block.xyz/newsroom/bitcoin-treasury-strategy

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https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000119312521028135/d424974d10k.htm

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7. Institutional Fund Custody: The New Face of Treasury Infrastructure

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The evolution of custody services represents another form of capital management underpinning Bitcoin’s ecosystem-level “treasury.”

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Key custodians include:

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Fidelity Digital Assets

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Anchorage Digital (OCC-chartered crypto bank)

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Coinbase Custody

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BitGo (with Lloyd’s insurance)

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These services are mission-critical to institutional allocation. While not part of the protocol, they represent the infrastructure layer enabling Bitcoin’s secure capital mobility.

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Sources:

https://www.fidelitydigitalassets.com

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https://www.anchorage.com/crypto-custody

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https://www.coinbase.com/prime/custody

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https://www.bitgo.com/insurance

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8. Bitcoin ETFs and Treasury Aggregation

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With the approval of spot Bitcoin ETFs in the U.S., institutional BTC exposure has further consolidated in the hands of asset managers like BlackRock (IBIT) and Fidelity (FBTC). These entities act as massive BTC aggregators, holding thousands of coins under trust structures, functioning as quasi-treasuries for passive capital inflow.

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While this centralization has sparked debates about custody concentration, it simultaneously reinforces Bitcoin’s financial footprint in traditional capital markets.

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9. Final Take: Treasury by Design, Not by Reserve

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Bitcoin flips the script on treasury thinking. It offers no formal cash reserve, no war chest, and no internal capital structure—yet it operates at a level of global economic influence that most VC-backed protocols aspire to.

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For institutional investors, this is a double-edged sword:

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Risk: No internal treasury to stabilize or pivot during shocks.

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Reward: Maximal decentralization and attack resistance.

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It is this very design—radically austere, devoid of discretionary control—that makes Bitcoin function less like a startup, and more like a monetary institution.

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References:

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https://en.bitcoin.it/wiki/Bitcoin#Economics

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https://bitcoin.org/en/how-it-works

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https://brink.dev/funding

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https://opensats.org

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https://hrf.org/devfund

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https://www.microstrategy.com/en/investor-relations/bitcoin

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https://www.anchorage.com/crypto-custody

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https://www.bitgo.com/insurance

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https://www.blackrock.com/us/individual/products/316337/ishares-bitcoin-trust

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8. Financials & Funding (continued)

C. Revenue Model 

‍

“Monetary Sovereignty Without Revenue: Bitcoin’s Economic Engine as a Non-Business Model”

‍

When evaluating any investable asset, especially in the blockchain space, a critical element of due diligence involves assessing the revenue model. In most crypto projects, this involves transaction fees, validator rewards, staking commissions, enterprise services, or SaaS-like monetization of core infrastructure. Bitcoin is once again an outlier.

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Bitcoin’s “revenue” is not generated in the traditional sense. It is not a business, does not issue invoices, and does not have a treasury-backed operational expenditure model. Yet, it sustains a trillion-dollar market, powers an entire asset class, and generates consistent economic outputs—just not through conventional channels.

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In this section, we dive deep into how Bitcoin’s decentralized architecture effectively replaces a traditional revenue model with a trustless, self-sustaining economic engine fueled by block subsidies, transaction fees, miner incentives, and ecosystem-wide service layers.

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1. No Business, No CEO, No Revenue Ledger

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Bitcoin has no CEO, no employees, no corporate balance sheet, and no formal revenue line item. It exists purely as open-source software governed by a decentralized network of miners, nodes, developers, and users. Therefore, revenue generation in Bitcoin must be interpreted differently.

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Instead of income statements, Bitcoin’s economic outputs are embedded in the protocol’s economic incentives. Two primary components of this are:

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Block Subsidy (Newly minted BTC per block)

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Transaction Fees (Paid by users for priority confirmation)

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This dual-incentive model ensures sustainability without centralized revenue capture.

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2. Block Subsidy: Protocol-Level Issuance as Revenue Proxy

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Every 10 minutes, new BTC is minted and rewarded to miners for securing the network. This block reward began at 50 BTC in 2009, and undergoes a “halving” every 210,000 blocks (approx. every four years). As of 2024, the reward is 6.25 BTC per block, with a reduction to 3.125 BTC expected in April 2024.

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This mechanism represents the primary monetary issuance model of Bitcoin and serves as a revenue stream—albeit one directed toward miners, not a protocol treasury.

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At current prices ($122 million per day** in miner “revenue” (CoinMetrics, 2024).

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Over time, this issuance will approach zero, with fees becoming the dominant incentive layer.

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3. Transaction Fees: Market-Driven Price Discovery

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Bitcoin users pay fees to have their transactions included in blocks. These fees are determined dynamically through fee markets, where users bid for inclusion based on network congestion.

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In periods of high activity (e.g., during bull runs or NFT inscriptions on Bitcoin via Ordinals), fees can spike dramatically.

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In quiet periods, fees can drop to near negligible levels.

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This market-based mechanism serves as Bitcoin’s native price discovery engine, creating additional “revenue” for miners, and eventually, the long-term sustainability model once subsidies diminish.

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For example, during the 2021 bull run, daily transaction fees regularly exceeded $10 million per day, rivaling Ethereum’s fee output on certain days (Glassnode, 2021).

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4. Miner Revenue as Network-Level Output

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While Bitcoin’s protocol has no direct revenue, miners represent the operational economic layer of the network. Miners convert CapEx (hardware), OpEx (electricity), and security contributions into BTC, monetizing their activity through block rewards and transaction fees.

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Miner revenue (subsidy + fees) is a strong proxy for economic activity on Bitcoin.

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As of March 2024, miners earn approximately $30–40 million per day, making Bitcoin the most profitable blockchain for consensus participants.

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This decentralized revenue model removes any single-point dependence on centralized income channels, which are common in VC-backed protocols.

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5. Layer 2 and Service Economy Revenue

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Although Bitcoin Layer-1 has no business model, the broader Bitcoin service economy has emerged around it, creating indirect revenue models through:

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a) Layer 2 Protocols (e.g., Lightning Network)

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These enable faster, cheaper transactions with service providers (like Wallet of Satoshi or Strike) charging routing or liquidity fees.

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Lightning node operators can earn revenue from fee routing and liquidity provisioning.

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In some regions, entire business ecosystems now operate on Lightning, including remittance providers and merchant payment rails.

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Source: https://lightning.network/

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b) Custodial Services

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Platforms like Coinbase, Kraken, and BitGo monetize Bitcoin custody via:

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Account fees

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Spread margins

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Trading commissions

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While this revenue is external to Bitcoin protocol, it forms part of the broader economic capture model of the Bitcoin ecosystem.

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c) ETFs and Trusts

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Asset managers like BlackRock (IBIT) and Grayscale (GBTC) charge management fees (0.2% to 2%) on AUM, turning Bitcoin exposure into recurring revenue.

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Grayscale, for instance, has earned hundreds of millions in fees annually from GBTC (SEC filings).

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6. Revenue Model Sustainability Post-Subsidy

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A key existential risk often cited is the diminishing block subsidy. As Bitcoin’s supply curve approaches 21 million coins, revenue from mining subsidies declines, and transaction fees must compensate.

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Critics argue this model is unsustainable. However, Bitcoin’s design presumes:

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Increased transaction demand

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Higher fee competitiveness

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Layer 2 scaling (Lightning, Ark, Fedimint)

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Recent years have seen growing fee markets during periods of NFT and inscription mania, showing potential for robust fee-driven sustainability.

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Still, this transition is unproven, and will remain a key watchpoint for institutional investors over the next 1–2 halving cycles.

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Source: https://www.cambridge.org/core/journals/business-ethics-quarterly/article/economic-sustainability-of-bitcoin-mining/F3AEAC9C89F10B1DC3DFA77E9A4D3C59

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7. Narrative Monetization as a Soft Revenue Model

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Bitcoin monetizes through narrative-driven capital flow, not income-generating products. Its “digital gold,” “freedom money,” and “sovereign hedge” narratives have catalyzed:

‍

Public company treasury allocations

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Nation-state adoption (El Salvador)

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ETF flows

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Institutional inflows via trust products

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This ideological monetization model is powerful—more akin to a store-of-value religion than a business model. While risky in the absence of hard cash flows, it remains Bitcoin’s strongest capital attraction mechanism.

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Source: https://www.imf.org/en/Blogs/Articles/2022/01/18/el-salvadors-bitcoin-decision-crypto-as-national-currency

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8. Final Perspective: Revenue Without Rent Extraction

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Bitcoin’s economic architecture achieves what most protocols fail to do: provide security, adoption, and capital flow without rent-seeking behavior. There are no protocol taxes, no staking commissions, no foundation salaries.

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Its "revenue model" is not to extract value from users, but to create a global economic substrate where:

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Users pay only what market conditions dictate (via fees)

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Miners earn only for provable work

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Institutions build services around it, not within it

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This model, while lacking in traditional business visibility, offers economic neutrality and long-term resilience—a unique attribute for institutional capital.

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References:

‍

https://bitcoin.org/en/how-it-works

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https://www.blockchain.com/explorer/charts/miners-revenue

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https://mempool.space/charts

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https://lightning.network/

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https://www.cambridge.org/core/journals/business-ethics-quarterly/article/economic-sustainability-of-bitcoin-mining/F3AEAC9C89F10B1DC3DFA77E9A4D3C59

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https://www.imf.org/en/Blogs/Articles/2022/01/18/el-salvadors-bitcoin-decision-crypto-as-national-currency

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https://www.sec.gov/ix?doc=/Archives/edgar/data/1588489/000119312521193314/d139694d10k.htm

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8. Financials & Funding (continued)

D. Burn Mechanisms

‍

“Disappearing Coins and Scarcity Economics: How Bitcoin’s Deflationary Nature Creates a Passive Burn Mechanism”

‍

When evaluating tokenomics in most blockchain projects, “burn mechanisms” are often prominently featured as a method of supply control—intentional actions taken by protocol teams to destroy tokens and reduce circulating supply. This is typically done through transaction fee burns (as in Ethereum’s EIP-1559), scheduled burns from treasuries, or community-led destruction of tokens to artificially create scarcity.

‍

Bitcoin, however, has no formal or programmed token burn mechanism. Yet, paradoxically, its economic system does achieve similar effects—albeit passively, through the principles of absolute supply scarcity, lost coins, deflationary issuance, and halving cycles.

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In this section, we analyze how Bitcoin’s unique tokenomics system simulates a burn dynamic through organic mechanics, and how that affects its long-term investment proposition from a supply-side economics perspective.

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1. Fixed Supply: The Ultimate Deflationary Framework

‍

Bitcoin was engineered with a hardcoded maximum supply of 21 million BTC. This upper limit is embedded directly in the protocol and is unchangeable without a consensus fork—an exceedingly unlikely event given the social and technical conservatism of Bitcoin’s development ecosystem.

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In contrast to altcoins that increase, inflate, or rebalance token supply, Bitcoin’s capped supply acts as a permanent deflationary anchor—a stark economic divergence from fiat currencies and inflationary tokens.

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While not a traditional "burn" mechanism, fixed issuance = permanent supply restriction, which functions economically as a non-reversible supply pressure, similar to token burning in other networks.

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"Bitcoin: A Peer-to-Peer Electronic Cash System" by Satoshi Nakamoto

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2. Lost Coins: The Passive, Irrecoverable Burn Engine

‍

One of the most powerful, yet often underappreciated, burn mechanisms in Bitcoin is the involuntary destruction of coins via wallet key loss. When a user loses access to their private keys—either through human error, device failure, or death—the BTC in that wallet becomes mathematically unrecoverable.

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According to industry estimates:

‍

3 to 4 million BTC are permanently lost, representing 15–20% of total supply.

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These include early miner coins, inaccessible Satoshi coins (~1.1 million), and coins sent to burn addresses.

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These losses are functionally equivalent to burns—they are removed from economic circulation forever, reducing effective supply and increasing scarcity.

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Source:

"Research: 3.7 Million Bitcoin Could Be Lost Forever" – Chainalysis

https://blog.chainalysis.com/reports/missing-bitcoins/

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Thank you for taking the time to read this article. We invite you to explore more content on our blog for additional insights and information.

https://www.thestandard.io/blog  

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