Proposed Gas/ Fee Discussion

Continuing the discussion from Zcash to sovereign rollup:

I have posted concepts only for fees. Here is rough thoughts summarized from other posts.

The best thing about fees is we dont need to recreate the wheel. We are price takers in context of fees. So we just need to match the competition. I can see several fee structures. Below is a very rough gas/fee structure for discussion.

Dynamic Fee Algorithm. This would be something similar to how Ethereum works. Users are charged fees based on mining costs, development (L1/L2 dev fund fees that split directly to assets), application (wallet or other), and excess fee as a reward for staking (or burn in the case of Ethereum. The fees get split per a formula. So lets say a 3rd party wallet developer creates a wallet, we might agree to give them X% of all transactions going out of or related to their wallet (DEX, transfers, etc). I think there should be a price cap and in some situations and a floor.

  1. CEX Fees. When a user moves coins from a CEX to XXXX. As an example, Ethereum charges around $6 to $8 to move a coin off their exchange.
  2. Value Added Message Fees. When a user adds a private message, they get charged a fee based on size, plus the regular fees.
  3. Wallet to Wallet Fees - I personally think private transfers should cost more than transparent because they are supposed to be what makes us better.
  4. Other - need to list all the ways a user should be charged. If we cant charge them, then we should really think if its a required feature.
  5. Value added fees - Other value added fees would be AMPera/Flexa. They charge something like 0.8% for wallet to POS retail purchases where the money is guaranteed to the merchant where use pays in ZEC and merchant receives fiat. These are the types of great inventions that get created from a fee system! And the third parties fund their own development because they want the fees. So the concept would be the 0.8% would be part of the application fee or a value added fee in addition to what the wallet developer would get.
  6. The one very big way I believe we can subsidize fees without issuance is collateral backed stablecoins. So we if control the float, the interest income from the assets can be used to subsidize the transaction costs. This could be big.

No one likes fees; but we have to have them to exist. its the cost of doing business. There is a very real possibility people end up paying the same 2%-3% they pay to Visa et al but they just get 5x the value. So same price to transaction and consumers just get more for their money. And if its lower great. We just need to get the economic model working!

My view is ZEC is not a fiat or meant to be used for spending because of its intrinsic vol as we see every day (yes it can be; but so can gold or I can monetize my baseball cards as well). So fees for ZEC should be much like Ethereum, Bitcoin, and maybe others since they are the price setters. People pay the fees and that is what supports the development ecosystem. So we should copy their algorithm and pricing…Just as important, and maybe even more importantly, a market pricing sets the foundation upon which investors or more sophisticated people can determine if the ecosystem is viable and if the growth is there to become viable over time. We have block rewards, so that provides a bridge to the future where we all want to see that there is a vision and expectation that fees and transaction volumes will support the ecosystem.

When we get stablecoins, the fees need to be very low. This needs to scale into the millions. But not lower than the market. Again the market sets the price and we just follow. Its critical its more than mining because we need a lot of money for development. But, if its not it means a) mining costs are just too high or b) we dont have the scale (eg transaction volume) or a combination of both.

My very rough back of the envelop calculation, which is extremely rough because its hard to know the number of real transactions, would be around $9 per TXN as Zcash is operating today (someone internally probably has a better idea). So this is the amount ZEC holders are subsidizing the mining and development costs. The goal is to charge fees now and begin the process of transitioning from a start up to a real operating ecosystem. Ethereum is the perfect example because they have a viable economic ecosystem. The fees they charge pay for all of the costs, plus extra which they use to burn coins. When the issuance is greater than the burn, the ecosystem is not economically viable (yet). When the issuance is less then the burn, the ecosystem is healthy.

In the case of ZEC, we dont have an issuance/burn model. We have a fixed supply model. It really works almost identically to ETH economically; but instead of a burn, we offer yield to stakers. I really dislike the “Sustainability Fund” concept as it appears they are positioning themselves to get these fees. Its another conversations; but In my view the way to decentralize is to create a fee structure where the applicataion developer gets the fees directly. So the fees go directly to the creators of the applications while Zcash focuses on the assets and blockchain. But that is a strategic decision on where that line is drawn, and who funsd the 3rd party apps.

People keep saying we need to keep fees low. That is not true. We need good value for the fee we charge. And we need to keep fees equal to the competition. So if Ethereum charges $5 and we charge $0.01 cent all we do it hurt ourselves because they can pay more for development and create a better ecosystem. Maybe we dont offer the same value as ETH; but you get the point. People dont want free, they want value for their money. ZEC can not give away transactions because we are not offering the bundle of attributes people want. If we do, people will pay the fees as long as we provide good value.

I cant think of anything more important than the price we charge.


Maybe post here what you said over there so anyone joining this thread can quickly understand your thoughts - also to clean up the conversation on the unrelated sovereign rollup thread.

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I’d suggest to reply to that person and simply redirect / link to the new thread to continue the discussion. I don’t agree with your view on this, but it’s good that you can have a thread dedicated to discussing it with others that may find it interesting.

@hanh can we have a gas charge when a user moves coins off a CEX?

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Hi everyone,

I’d like to share my perspective on the proposal. While I appreciate the initiative, the proposed fee increase makes me somewhat uncomfortable. Changes often evoke that feeling.

when the cost of a transaction is ~$9 and the charge is $0, it doesn’t take a genius to predict the outcome. By not aligning fees and costs now (and the things that can help bring costs down), the negative impacts on ZEC price from inflationary funding will continue as well as leave open the risk the 21m cap wont be maintained. Meanwhile the significant positive benefits from fee income on development of a viable decentralized application driven ecosystem are ignored.

@joshs It would be great to have some clarity on how the Zcash ecosystem intends to pay for costs because a) $0 fees can only mean one thing and that is b) inflation and a breach of the 21m cap. If not, please explain how costs get paid without inflation or fees.