Years ago, while I was in my college, I was amazed to learn that in some poor countries whose governments collected very little revenue, not much more than import or export taxes, 'seigniorage' financed a large part of public outlays. In poor countries a chunk of public revenue comes from the government monopoly on printing bank notes. As a consequence, inflation in those countries runs relatively high with government always strugging not to keep more then 2% theoretically. In fact, countries inflation rates can be interpreted as a monetary tax levied by the government on the whole economy. I learned that income from seigniorage, though it still exists, represents a considerable amount of public revenues for goverment.
It is obvious that fiat money leads to seigniorage income for the sovereign(India), but I think decentralized Bitcoin would not give chance to Mother Indian earn seignorage income.Thinking about Bitcoin design, it allows
only those with enough computing power(
developed countries) to extract two forms of seigniorage income:
a. In the early years(2009-2016) of Bitcoin, computing power allows the mining of new bitcoins. This is
pure seigniorage for them(almost 100% of market value considering it took little resource to mine earlier coin during initial years and recently mined coined would earn them
Market Value minus cost of mining a coin i.e $900-$20 approximately). Right now, we're paying seigniorage to government. If we adopt Bitcoin, we'll be paying to same to 'computing countries'.
Dicussion needed!b. When most of the coins have been mined, computing power is going to be used to charge transaction fees on every bitcoin transaction irrespective of border. This is also seigniorage income in the form of an all encompassing Tobin tax beyond the wildest dreams of the proponents of that tax and Bitcoin enthusiast. What if India isn't able to catch on arms race of mining(
i.e. future payment processor)?
BasicsSeigniorage is part of public finance and government's meagre earning source like income tax and VAT. If we have to define seigniorage, we can say, it is earning of government for monopoly issuing new notes.
Example:Suppose Govt. of India issued Rs. 100000 new notes and it was given for purchasing Gold of any other company. After one year, govt. of India sells this Gold and receives Rs. 200000 due to inflation and increasing the price of gold. Then Rs. 100000 is seigniorage. In seigniorage, govt. receives profit due to decreasing the value of currency.
Formula of Calculating Seigniorage
Seigniorage= Net profit on producing of new notes and coinsSuppose Indian goverment produced Rs. 500 one note and its cost for printing was just Rs. 100. If govt. of India pays Rs. 500 for repayment of his loan, then Rs. 400 net profit on producing of new note will be the seigniorage of govt. of India.
Any thoughts my fellow enthusiast with flag of revolution in hand?
Strictly for Indian enthusiast 
