Burn-and-Mint Tokenomics: Deflation and Strategic Incentives

We provide a game-theoretic analysis of deflationary burn-and-mint tokenomics, studying individual incentives, theoretically and through numerical simulations, to identify the circumstances under which economic collapse can be avoided. We identify a necessary deflation threshold to guarantee preservation of value and propose to fix rewards in fiat as a remedy to the asymptotic underincentivization of network contributors occurring in deflationary burn-and-mint.