Ethereum monetary policy and EIP-1559

Every cryptocurrency has a monetary policy. Monetary inflation of a crypto-asset injects freshly minted tokens into circulation by rewarding network or protocol contributors. For instance, a DeFi protocol might incentivize liquidity providers and users with the protocol-native tokens, whereas miners (under proof-of-work consensus) or validators (under proof-of-stake consensus) of a blockchain batch transactions into a block and are rewarded with the native asset of the chain.

Bitcoin arguably has one of the most straightforward monetary policies. The entity that mines a Bitcoin block gets compensated with inflationary BTC. The block reward is halved every 210,000 blocks, which equates to roughly four years, until the 21 million maximum supply is reached. As of this writing, 6.25 BTC is injected into circulation every Bitcoin block (~10 minutes). Sustainability aside, having a discernible supply ceiling helps foster a “store of value” narrative, and it is widely embraced within the Bitcoin community.