Threat Level Paradox

As explained by the zero sum property, the only way to defeat external subsidy (not to be confused with consensus subsidy) is to mine at a capital loss, either in absolute terms or relative to market return on capital (opportunity cost). 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 considers states a threat to hard currency one must assume that both tax and subsidy will be used to reduce the cost of achieving control over 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 to people for defense against market aggression, the nullification of seigniorage.

Paradoxically, this works for of Bitcoin when it is under attack but works against it otherwise. If there was no protocol-based pooling pressure then market and anti-market forces would be balanced. But risk sharing is essential to security and the protocol creates pooling pressure. So the protocol creates ever-expanding attack surface (e.g. China) that does not have any economic pressure to contract unless effective monetary alternatives are under attack (e.g. Venezuela). The suppression of alternatives raises relative reward utility, acting as a form of subsidy to the miner.