Emission
Emission in cryptocurrency refers to the process of creating and releasing new tokens or coins into circulation. This process is typically predefined by the blockchain protocol and plays a critical role in maintaining the network, incentivizing participants, and controlling the overall supply of the cryptocurrency.
Emission can occur through mechanisms such as mining, staking, or token distribution during a project’s launch or fundraising phase. The rate of emission is usually defined in the cryptocurrency's whitepaper and may include features like fixed supply, inflationary models, or decreasing rewards over time.
Types of Emission Models:
- Fixed Emission:
The cryptocurrency has a predetermined supply cap (e.g., Bitcoin’s 21 million coins). Tokens are gradually released until the cap is reached. - Inflationary Emission:
New tokens are continually added to the supply without a fixed limit, maintaining network operations but potentially causing inflation. - Deflationary Emission:
Tokens are burned or removed from circulation to reduce the total supply, aiming to increase scarcity and value over time. - Halving Models:
Emission decreases over time, as seen with Bitcoin’s halving events, where miners’ rewards are cut in half approximately every four years.
Why Emission is Important:
- Incentivizes Participation: Miners or stakers are rewarded through token emission, ensuring the network’s security and functionality.
- Controls Supply: Emission mechanisms regulate the availability of tokens, impacting their value and scarcity.
- Economic Design: Different emission models are tailored to align with the goals and sustainability of a blockchain project.
Examples of Emission:
- Bitcoin (BTC): Uses a fixed emission model with a supply cap of 21 million coins.
- Ethereum (ETH): Operates on an inflationary emission model but includes token burns through the EIP-1559 mechanism. Polkadot (DOT): Implements a staking-based emission system to maintain the network.