Seigniorage

Seigniorage is the profit an issuer captures by creating money, equal to the difference between the face value of the currency and the cost of producing it and putting it into circulation. The term descends from the right of a feudal lord (seigneur) to mint coin. If a banknote with a face value of twenty dollars costs only a few cents to print, the remainder accrues to the issuing authority as revenue.

From coins to electronic reserves

With physical cash, seigniorage is the spread between face value and the cost of paper, ink, and minting. With modern central banking the cost of creating money electronically is effectively negligible, so the gap, and the associated revenue, is large. Central banks also earn related income from the interest on the assets they acquire when they issue reserves, which is sometimes folded into a broader notion of seigniorage. Much of this income is typically remitted to the government, functioning as revenue raised without explicit taxation.

Why it matters in the Bitcoin context

Seigniorage explains part of the incentive behind monetary expansion: issuing money is profitable for the issuer, which critics argue can bias policy toward more issuance. Heavy reliance on it can fuel inflation and erode purchasing power, a dynamic related to currency debasement and the Cantillon effect. Bitcoin has no issuer seigniorage of this kind; new coins flow to miners under fixed protocol rules rather than to a central authority.

D-Central offers this as educational background, not commentary on any specific institution. Compare with fiat currency.