The Block Subsidy model considers the cumulative cost of production for all units in the supply (the Thermocap) as a reference rate for monetary premium.

Under the assumption that miners are rational, profit motivated actors, miners should be willing to expense up to the maximum fiat denominated reward offered by the protocol. By taking a cumulative sum of all block rewards through history (subsidy and fees), we can estimate this maximum rational investment that miners have made to mine the circulating supply.

The Block Subsidy Model then identifies that multiples of the Thermocap tend to reflect a monetary premium that an asset has reached above its cost of production.

Coined By

Permabull Niño, 2019

Resources

A Look at Block Subsidies: A Network-Based Approach to Valuing Cryptocurrencies