Threat Level Paradox

As explained in Zero Sum Property, the only way to defeat external subsidy is to mine at a capital loss relative to market return on capital. The only way to defeat tax, up to and including a 100% tax (prohibition), is to mine in secret. As with all black markets there is an increased cost to subversive mining. Competing against subsidized mining compounds the cost.

If one accepts the axiom of resistance one must assume that both tax and subsidy will be used to reduce the cost of controlling Bitcoin. In order to enjoy the benefits of a hard currency, people will ultimately have to mine at a loss. However states will need to incur the same cost in order to continue to extract that penalty, either through subsidy or tax enforcement. This is the lever that Bitcoin provides for defense against market aggression, a tool to nullify seigniorage.

Paradoxically, this tool works well when money is under attack and poorly otherwise. If there was no internal pooling-pressure these cases would be balanced. But risk distribution is essential to subversive mining, and pooling pressure works against distribution. So there is ever-expanding attack surface (e.g. China) with no pressure to contract unless effective monetary alternatives are suppressed (e.g. Venezuela). The suppression of alternatives raises reward utility to the miner lacking alternatives.

The expected consequence is that Bitcoin will not be well prepared for attacks because it is financially disadvantageous for people in a low threat environment.