The primary expense that must be paid by a blockchain is that of security. The blockchain must pay miners or validators to economically participate in its consensus protocol, whether proof of work or proof of stake, and this inevitably incurs some cost. There are two ways to pay for this cost: inflation and transaction fees. Currently, Bitcoin and Ethereum, the two leading proof-of-work blockchains, both use high levels of inflation to pay for security; the Bitcoin community presently intends to decrease the inflation over time and eventually switch to a transaction-fee-only model. NXT, one of the larger proof-of-stake blockchains, pays for security entirely with transaction fees, and in fact has negative net inflation because some on-chain features require destroying NXT; the current supply is 0.1% lower than the original 1 billion. The question is, how much “defense spending” is required for a blockchain to be secure, and given a particular amount of spending required, which is the best way to get it?

Absolute size of PoW / PoS Rewards

To provide some empirical data for the next section, let us consider bitcoin as an example. Over the past few years, bitcoin transaction revenues have been in the range of 15-75 BTC per day, or about 0.35 BTC per block (or 1.4% of current mining rewards), and this has remained true throughout large changes in the level of adoption.

It is not difficult to see why this may be the case: increases in BTC adoption will increase the total sum of USD-denominated fees (whether through transaction volume increases or average fee increases or a combination of both) but also decrease the amount of BTC in a given quantity of USD, so it is entirely reasonable that, absent exogenous block size crises, changes in adoption that do not come with changes to underlying market structure will simply leave the BTC-denominanted total transaction fee levels largely unchanged.

In 25 years, bitcoin mining rewards are going to almost disappear; hence, the 0.35 BTC per block will be the only source of revenue. At today’s prices, this works out to ~$35000 per day or $10 million per year. We can estimate the cost of buying up enough mining power to take over the network given these conditions in several ways.

First, we can look at the network hashpower and the cost of consumer miners. The network currently has 1471723 TH/s of hashpower, the best available miners cost $100 per 1 TH/s, so buying enough of these miners to overwhelm the existing network will cost ~$147 million USD. If we take away mining rewards, revenues will decrease by a factor of 36, so the mining ecosystem will in the long term decrease by a factor of 36, so the cost becomes $4.08m USD. Note that this is if you are buying new miners; if you are willing to buy existing miners, then you need to only buy half the network, knocking the cost of what Tim Swanson calls a “Maginot line” attack all the way down to ~$2.04m USD.

However, professional mining farms are likely able to obtain miners at substantially cheaper than consumer costs. We can look at the available information on Bitfury’s $100 million data center, which is expected to consume 100 MW of electricity. The farm will contain a combination of 28nm and 16nm chips; the 16nm chips “achieve energy efficiency of 0.06 joules per gigahash”. Since we care about determining the cost for a new attacker, we will assume that an attacker replicating Bitfury’s feat will use 16nm chips exclusively. 100 MW at 0.06 joules per gigahash (physics reminder: 1 joule per GH = 1 watt per GH/sec) is 1.67 billion GH/s, or 1.67M TH/s. Hence, Bitfury was able to do $60 per TH/s, a statistic that would give a $2.45m cost of attacking “from outside” and a $1.22m cost from buying existing miners.

Hence, we have $1.2-4m as an approximate estimate for a “Maginot line attack” against a fee-only network. Cheaper attacks (eg. “renting” hardware) may cost 10-100 times less. If the bitcoin ecosystem increases in size, then this value will of course increase, but then the size of transactions conducted over the network will also increase and so the incentive to attack will also increase. Is this level of security enough in order to secure the blockchain against attacks? It is hard to tell; it is my own opinion that the risk is very high that this is insufficient and so it is dangerous for a blockchain protocol to commit itself to this level of security with no way of increasing it (note that Ethereum’s current proof of work carries no fundamental improvements to Bitcoin’s in this regard; this is why I personally have not been willing to commit to an ether supply cap at this point).

In a proof of stake context, security is likely to be substantially higher. To see why, note that the ratio between the computed cost of taking over the bitcoin network, and the annual mining revenue ($932 million at current BTC price levels), is extremely low: the capital costs are only worth about two months of revenue. In a proof of stake context, the cost of deposits should be equal to the infinite future discounted sum of the returns; that is, assuming a risk-adjusted discount rate of, say, 5%, the capital costs are worth 20 years of revenue. Note that if ASIC miners consumed no electricity and lasted forever, the equilibrium in proof of work would be the same (with the exception that proof of work would still be more “wasteful” than proof of stake in an economic sense, and recovery from successful attacks would be harder); however, because electricity and especially hardware depreciation do make up the great bulk of the costs of ASIC mining, the large discrepancy exists. Hence, with proof of stake, we may see an attack cost of $20-100 million for a network the size of Bitcoin; hence it is more likely that the level of security will be enough, but still not certain.

The Ramsey Problem

Let us suppose that relying purely on current transaction fees is insufficient to secure the network. There are two ways to raise more revenue. One is to increase transaction fees by constraining supply to below efficient levels, and the other is to add inflation. How do we choose which one, or what proportions of both, to use?

Fortunately, there is an established rule in economics for solving the problem in a way that minimizes economic deadweight loss, known as Ramsey pricing. Ramsey’s original scenario was as follows. Suppose that there is a regulated monopoly that has the requirement to achieve a particular profit target (possibly to break even after paying fixed costs), and competitive pricing (ie. where the price of a good was set to equal the marginal cost of producing one more unit of the good) would not be sufficient to achieve that requirement. The Ramsey rule says that markup should be inversely proportional to demand elasticity, ie. if a 1% increase in price in good A causes a 2% reduction in demand, whereas a 1% increase in price in good B causes a 4% reduction in demand, then the socially optimal thing to do is to have the markup on good A be twice as high as the markup on good B (you may notice that this essentially decreases demand uniformly).

The reason why this kind of balanced approach is taken, rather than just putting the entire markup on the most inelastic part of the demand, is that the harm from charging prices above marginal cost goes up with the square of the markup. Suppose that a given item takes $20 to produce, and you charge $21. There are likely a few people who value the item at somewhere between $20 and $21 (we’ll say average of $20.5), and it is a tragic loss to society that these people will not be able to buy the item even though they would gain more from having it than the seller would lose from giving it up. However, the number of people is small and the net loss (average $0.5) is small. Now, suppose that you charge $30. There are now likely ten times more people with “reserve prices” between $20 and $30, and their average valuation is likely around $25; hence, there are ten times more people who suffer, and the average social loss from each one of them is now $5 instead of $0.5, and so the net social loss is 100x greater. Because of this superlinear growth, taking a little from everyone is less bad than taking a lot from one small group.

Notice how the “deadweight loss” section is a triangle. As you (hopefully) remember from math class, the area of a triangle is width * length / 2, so doubling the dimensions quadruples the area.

In Bitcoin’s case, right now we see that transaction fees are and consistently have been in the neighborhood of ~50 BTC per day, or ~18000 BTC per year, which is ~0.1% of the coin supply. We can estimate as a first approximation that, say, a 2x fee increase would reduce transaction load by 20%. In practice, it seems like bitcoin fees are up ~2x since a year ago and it seems plausible that transaction load is now ~20% stunted compared to what it would be without the fee increase (see this rough projection); these estimates are highly unscientific but they are a decent first approximation.

Now, suppose that 0.5% annual inflation would reduce interest in holding BTC by perhaps 10%, but we’ll conservatively say 25%. If at some point the Bitcoin community decides that it wants to increase security expenditures by ~200,000 BTC per year, then under those estimates, and assuming that current txfees are optimal before taking into account security expenditure considerations, the optimum would be to push up fees by 2.96x and introduce 0.784% annual inflation. Other estimates of these measures would give other results, but in any case the optimal level of both the fee increase and the inflation would be nonzero. I use Bitcoin as an example because it is the one case where we can actually try to observe the effects of growing usage restrained by a fixed cap, but identical arguments apply to Ethereum as well.

Game-Theoretic Attacks

There is also another argument to bolster the case for inflation. This is that relying on transaction fees too much opens up the playing field for a very large and difficult-to-analyze category of game-theoretic attacks. The fundamental cause is simple: if you act in a way that prevents another block from getting into the chain, then you can steal that block’s transactions. Hence there is an incentive for a validator to not just help themselves, but also to hurt others. This is even more direct than selfish-mining attacks, as in the case of selfish mining you hurt a specific validator to the benefit of all other validators, whereas here there are often opportunities for the attacker to benefit exclusively.

In proof of work, one simple attack would be that if you see a block with a high fee, you attempt to mine a sister block containing the same transactions, and then offer a bounty of 1 BTC to the next miner to mine on top of your block, so that subsequent validators have the incentive to include your block and not the original. Of course, the original miner can then follow up by increasing the bounty further, starting a bidding war, and the miner could also pre-empt such attacks by voluntarily giving up most of the fee to the creator of the next block; the end result is hard to predict and it’s not at all clear that it is anywhere close to efficient for the network. In proof of stake, similar attacks are possible.

How to distribute fees?

Even given a particular distribution of revenues from inflation and revenues from transaction fees, there is an additional choice of how the transaction fees are collected. Though most protocols so far have taken one single route, there is actually quite a bit of latitude here. The three primary choices are:

• Fees go to the validator/miner that created the block
• Fees go to the validators equally
• Fees are burned

Arguably, the more salient difference is between the first and the second; the difference between the second and the third can be described as a targeting policy choice, and so we will deal with this issue separately in a later section. The difference between the first two options is this: if the validator that creates a block gets the fees, that validator has an incentive equal to the size of the fees to include as many transactions as possible. If it’s the validators equally, each one has a negligible incentive.

Note that literally redistributing 100% of fees (or, for that matter, any fixed percentage of fees) is infeasible due to “tax evasion” attacks via side-channel payment: instead of adding a transaction fee using the standard mechanism, transaction senders will put a zero or near-zero “official fee” and pay validators directly via other cryptocurrencies (or even PayPal), allowing validators to collect 100% of the revenue. However, we can get what we want by using another trick: determine in protocol a minimum fee that transactions must pay, and have the protocol “confiscate” that portion but let the miners keep the entire excess (alternatively, miners keep all transaction fees but must in turn pay a fee per byte or unit gas to the protocol; this a mathematically equivalent formulation). This removes tax evasion incentives, while still placing a large portion of transaction fee revenue under the control of the protocol, allowing us to keep fee-based issuance without introducing the game-theoretic malicentives of a traditional pure-fee model.

The protocol cannot take all of the transaction fee revenues because the level of fees is very uneven and because it cannot price-discriminate, but it can take a portion large enough that in-protocol mechanisms have enough revenue allocating power to work with to counteract game-theoretic concerns with traditional fee-only security.

One possible algorithm for determining this minimum fee would be a difficulty-like adjustment process that targets a medium-term average gas usage equal to 1/3 of the protocol gas limit, decreasing the minimum fee if average usage is below this value and increasing the minimum fee if average usage is higher.

We can extend this model further to provide other interesting properties. One possibility is that of a flexible gas limit: instead of a hard gas limit that blocks cannot exceed, we have a soft limit G1 and a hard limit G2 (say, G2 = 2 * G1). Suppose that the protocol fee is 20 shannon per gas (in non-Ethereum contexts, substitute other cryptocurrency units and “bytes” or other block resource limits as needed). All transactions up to G1 would have to pay 20 shannon per gas. Above that point, however, fees would increase: at (G2 + G1) / 2, the marginal unit of gas would cost 40 shannon, at (3 * G2 + G1) / 4 it would go up to 80 shannon, and so forth until hitting a limit of infinity at G2. This would give the chain a limited ability to expand capacity to meet sudden spikes in demand, reducing the price shock (a feature that some critics of the concept of a “fee market” may find attractive).

What to Target

Let us suppose that we agree with the points above. Then, a question still remains: how do we target our policy variables, and particularly inflation? Do we target a fixed level of participation in proof of stake (eg. 30% of all ether), and adjust interest rates to compensate? Do we target a fixed level of total inflation? Or do we just set a fixed interest rate, and allow participation and inflation to adjust? Or do we take some middle road where greater interest in participating leads to a combination of increased inflation, increased participation and a lower interest rate?

In general, tradeoffs between targeting rules are fundamentally tradeoffs about what kinds of uncertainty we are more willing to accept, and what variables we want to reduce volatility on. The main reason to target a fixed level of participation is to have certainty about the level of security. The main reason to target a fixed level of inflation is to satisfy the demands of some token holders for supply predictability, and at the same time have a weaker but still present guarantee about security (it is theoretically possible that in equilibrium only 5% of ether would be participating, but in that case it would be getting a high interest rate, creating a partial counter-pressure). The main reason to target a fixed interest rate is to minimize selfish-validating risks, as there would be no way for a validator to benefit themselves simply by hurting the interests of other validators. A hybrid route in proof of stake could combine these guarantees, for example providing selfish mining protection if possible but sticking to a hard minimum target of 5% stake participation.

Now, we can also get to discussing the difference between redistributing and burning transaction fees. It is clear that, in expectation, the two are equivalent: redistributing 50 ETH per day and inflating 50 ETH per day is the same as burning 50 ETH per day and inflating 100 ETH per day. The tradeoff, once again, comes in the variance. If fees are redistributed, then we have more certainty about the supply, but less certainty about the level of security, as we have certainty about the size of the validation incentive. If fees are burned, we lose certainty about the supply, but gain certainty about the size of the validation incentive and hence the level of security. Burning fees also has the benefit that it minimizes cartel risks, as validators cannot gain as much by artificially pushing transaction fees up (eg. through censorship, or via capacity-restriction soft forks). Once again, a hybrid route is possible and may well be optimal, though at present it seems like an approach targeted more toward burning fees, and thereby accepting an uncertain cryptocurrency supply that may well see low decreases on net during high-usage times and low increases on net during low-usage times, is best. If usage is high enough, this may even lead to low deflation on average.

]]> https://earlybirdsinvest.com/on-inflation-transaction-fees-and-cryptocurrency-monetary-policy/feed/ 0 58019 https://earlybirdsinvest.com/athena-bitcoin-sued-for-hidden-fees-and-enabling-crypto-scams/ https://earlybirdsinvest.com/athena-bitcoin-sued-for-hidden-fees-and-enabling-crypto-scams/#respond Wed, 10 Sep 2025 09:38:30 +0000 https://earlybirdsinvest.com/athena-bitcoin-sued-for-hidden-fees-and-enabling-crypto-scams/

The District of Columbia has accused Athena Bitcoin
BTC


$112,190.74

, a company that operates cryptocurrency ATMs, of collecting hidden fees and failing to protect users from fraud.

The lawsuit, brought by Attorney General Brian Schwalb, claimed that Athena Bitcoin allowed scams to flourish through its kiosks and took advantage of users by not clearly stating the charges.

Athena Bitcoin began operating in DC in May 2024. Within the first five months, officials reported that the majority of transactions, around 93%, were connected to scams.

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Many of the affected users were elderly or otherwise vulnerable. Schwalb’s office alleged that one customer alone lost $98,000 through an Athena ATM.

Instead of using straightforward language to explain transaction costs, Athena Bitcoin reportedly used the term “Transaction Service Margin” in its Terms of Service. The word “fee” was never mentioned.

According to the attorney general, this wording misled users and prevented them from understanding the charges they were being assessed. The complaint stated that fees reached as high as 26% per transaction and were not shown clearly at any point during the process.

Additionally, Athena Bitcoin is accused of failing to implement proper anti-fraud protections. The complaint described the company’s machines as a “pipeline for illicit international fraud transactions” and alleged that the company turned a blind eye while continuing to profit.

The lawsuit also said the company does not allow users to recover lost funds, even in cases where scams are clearly involved. This approach left victims without a means to recover their money or even reclaim the fees they had been charged.

Recently, Taylor Thomson, a member of the Thomson Reuters family, lost over $80 million in cryptocurrency. How? Read the full story.

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Donald Trump’s crypto initiative, World Liberty Financial, went live on Sept. 1 with a market valuation above $7.4 billion, sparking heavy trading in its opening hours.

According to CoinMarketCap data, WLFI climbed 13% to $0.2525 shortly after launch, while its trading volume has already surpassed $1.8 billion across centralized and decentralized exchanges.

Notably, this rush of activity spilled over into the broader market.

According to Milk Road data, Ethereum gas fees, which hovered near zero before the token’s debut, surged to more than 60 gwei as traders competed to settle WLFI transactions on the chain.

This spike highlighted how much interest the Trump-linked token has generated among retail traders and institutions.

WLFI token

In a Sept.1 blog post, the World Liberty Financial team stated that the launch introduced more than 24.6 billion WLFI into circulation.

Out of this supply, about 10 billion tokens were retained by the project’s parent company, World Liberty Financial, Inc. Another 7.78 billion tokens were assigned to Alt5 Sigma Corporation, giving it close to eight percent of the total supply as part of its treasury strategy.

Nearly 2.9 billion tokens were directed toward exchange activity to maintain liquidity and support early marketing. At the same time, more than 4 billion were distributed to public sale participants with an initial 20 percent unlocked at launch.

The team stated that the remaining 76 billion tokens are “subject to vesting schedules or are otherwise locked.” These tokens belong to its strategic partners, the project’s team, and its treasury.

Trump Jr. framed the token as central to the project’s long-term mission, emphasizing that WLFI is designed as a governance layer rather than a speculative instrument.

Meanwhile, Tron founder Justin Sun, who publicly aligned himself with the project, reinforced this position by pledging not to sell his unlocked holdings.

He also announced that to mark the launch, USD1 circulation on Tron would expand to $200 million, linking the success of WLFI with broader stablecoin growth on his blockchain.

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A proposal to cut the cost of energy, a resource used to process transactions, is gaining support and is nearing the number of votes needed to pass.

The voting ends on August 29, and if just one more approval is secured, the plan will move forward.

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The change would lower the energy price from 210 sun to 100 sun. In Tron’s system, 1 TRX equals 1,000,000 sun, so that this change would cut the energy cost by more than half.

This means that many users, especially those sending numerous transactions, such as stablecoin transfers, would require less TRX to cover fees.

However, with energy priced at 210 sun, about 76 million TRX is burned or removed from circulation. If the new rate of 100 sun is adopted, that burn rate would fall, which might lead to more TRX being created than destroyed, unless transaction activity increases to make up the difference.

As of August 27, 17 of the 27 Super Representatives, the entities that validate blocks and vote on upgrades, had approved the proposal. These include participants like Chain Cloud, CryptoChain, Nansen, HTX.com, P2P.org, and Tron Alliance.

Ten more have yet to vote, and only one more “yes” is needed to meet the required 18 approvals.

Meanwhile, Solana recently experienced a short-lived surge in network activity, with transactions per second (TPS) reaching six figures. How? Read the full story.

Good Morning, Asia. Here’s what’s making news in the markets:

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Bitcoin’s price is holding near records, but the chain itself is quiet. Glassnode data shows transaction fees have collapsed back toward decade lows, even as BTC flirts with six figures.

In past cycles, fee spikes tracked bull markets as traders bid for blockspace. This year, the fee curve is flat while price rises, a clear sign that onchain demand is no longer driving the market.

A new report from Galaxy Research shows median daily fees have fallen more than 80% since April 2024, with as much as 15% of daily blocks now clearing at just 1 satoshi per vbyte. Nearly half of recent blocks are not full, signaling weak demand for blockspace and a dormant mempool.

This is a sharp contrast to prior bull cycles, where price rallies translated into congestion and fee spikes.

The data confirms a structural shift: spot ETFs and custodians now hold more than 1.3 million BTC, and coins parked in those wrappers rarely touch the chain again.

At the same time, retail activity that once clogged the Bitcoin blockchain has migrated to Solana, where memecoins and NFTs benefit from cheaper and faster execution. The result, Galaxy notes, is that the bitcoin price is being set by custodial inflows while the network’s onchain demand – once a proxy for price movement – has slowed down.

For miners, this dynamic is particularly punishing. With rewards halved to 3.125 BTC and fees contributing less than 1% of block revenue in July, profitability is under strain. That stress is pushing listed miners to diversify into AI and HPC hosting.

Read more: Bitcoin Mining Faces ‘Incredibly Difficult’ Market as Power Becomes the Real Currency

A report from earlier this year by Rittenhouse Research argues that Galaxy Digital’s move out of mining altogether could be the model for the sector.

This move has been applauded by the equity markets. While BTC is down more than 3% on-year, the CoinShares Bitcoin Mining ETF has gained nearly 22%. Investors are rewarding firms that have leaned into diversification rather than relying on block rewards alone.

Listed miners tell a similar story. Hive, Core Scientific, and TeraWulf all reported Q2 results padded by HPC and AI hosting revenues.

Those with no diversification, like Bitdeer and BitFuFu, remain deeply exposed to electricity costs, equipment depreciation, and a fee market that Galaxy warns in its report is “anything but robust.”

The juxtaposition is telling: Galaxy’s own research warns that the Bitcoin blockchain’s settlement role is stagnating, while Galaxy’s balance sheet is being repositioned for growth in AI data centers.

Onchain data makes the point: without organic demand for blockspace, fees can’t fund security. And if fees stay low, equity markets are painting a clear picture that mining sector’s best future returns may come from AI, not Bitcoin.

Market Movements

BTC: Bitcoin traded at $113,286.95, down 1.79%, after briefly plunging to a six-week low near $110,600, with the broader crypto market facing heavy liquidations and volatility.

ETH: Ether traded flat at $4,779 as Jerome Powell’s dovish Jackson Hole remarks boosted expectations of a September rate cut, with asset managers predicting new highs for bitcoin and an ETH breakout above $5,000 despite risks from treasury adoption and equity volatility.

Gold: Gold closed at $3,371 after Powell’s dovish Jackson Hole remarks boosted September rate-cut odds.

Nikkei 225: Asia-Pacific stocks climbed Monday, with Japan’s Nikkei 225 up 1.08%, after Powell signaled potential Fed rate cuts in September during his Jackson Hole speech.

Elsewhere in Crypto

• The Funding: Why raising a crypto VC fund is harder now — even in a bull market (The Block)
• Why Luca Netz Will Be ‘Disappointed’ If Pudgy Penguins Doesn’t IPO Within 2 Years (Decrypt)
• KPMG Says Investor Interest in Digital Assets Will Drive Strong Second Half for Canadian Fintechs (CoinDesk)

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Tether CEO Paolo Ardoino has revealed a staggering 40% of all fees that users are paying on the major blockchains are spent to move USDT.

USDT Transfers Make Up For A Notable Portion Of Network Fees

In a post on X, Paolo Ardoino has shared the latest data related to USDT’s transfer fees share on the major blockchains. Transfer fee here naturally refers to the amount that senders have to attach with their network transactions as a reward for the validators.

Below is the chart shared by the Tether CEO that shows the trend in the percentage of these transfer fees that users on major networks are paying for making USDT transfers.

The 7-day moving average value of the metric appears to have climbed up in recent months | Source: @paoloardoino on X

Nine networks are included here: Ethereum, Tron, Toncoin, Solana, BSC, Avalanche, Arbitrum, Polygon, and Optimism. From the graph, it’s visible that the 7-day moving average fees share of USDT transfers across these chains recently hit the 40% mark.

Fees usage can serve as a proxy for transaction activity, so this high share would indicate strong user interest in Tether’s stablecoin. “Hundreds of millions of people in emerging markets use Tether’s digital dollar USDt daily, to protect their families from local inflation and devaluation of their national currencies,” notes Ardoino.

On most networks, the transfer fee is paid using the chain’s native token, even when the transaction involves a secondary coin. For example, ETH is required to make any kind of transaction on the Ethereum network.

Since stablecoins like USDT run on blockchains like these, senders also need to own the network’s main token to participate in transfers related to them. Among the chains included in the above data, however, there is one exception: Tron.

This year, the blockchain launched a feature that allows users to pay gas fees in other tokens, including USDT. As a result, Tron has established itself as the dominant network when it comes to the supply of the number one stablecoin.

“Blockchains that will focus on lower gas fees, allowing paying these in USDT will take over the world,” says the Tether CEO.

In related news, the on-chain volume associated with all stablecoins set a new record recently, as institutional DeFi solutions provider Sentora has pointed out in an X post.

The trend in the volume associated with the different stablecoins | Source: Sentora on X

As displayed in the above chart, the combined monthly transaction volume of the stablecoins crossed $1.5 trillion last month, which is a new all-time high (ATH).

ETH Price

At the time of writing, Ethereum is trading around $3,600, down more than 4% over the past week.

The price of the coin appears to have recovered a bit since its low | Source: ETHUSDT on TradingView

Featured image from Dall-E, chart from TradingView.com

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Ethereum co-founder Vitalik Buterin and researcher Anders Elowsson have introduced a proposal to overhaul how users pay for transactions on the network.

The plan centers around a unified multidimensional fee market, designed to simplify fee calculation and improve economic efficiency across the Ethereum ecosystem.

The proposal arrives during a period of low network fees. Over the past week, Ethereum’s median gas price has consistently remained under 1 Gwei, marking the lowest levels this year.

This context emphasizes the need for a more adaptable and efficient fee structure to support future growth.

Multidimensional fee market

At the proposal’s core is a single max_fee value users set when submitting a transaction. This fee would apply across all network resources, such as computation, storage, and calldata, instead of requiring users to assign different fee limits to each.

By making max_fee fungible across these dimensions, Ethereum can allocate the fee “dynamically” to whichever resource needs it most, optimizing capital usage.

According to the proposal:

“The fee market is further unified in terms of a single update fraction under a single fee update mechanism, generalized reserve pricing, and a gas normalization that retains current percentage ranges while keeping the price stable whenever a gas limit changes.”

Currently, Ethereum operates with separate fee systems: EIP-1559 governs regular gas, while EIP-4844 covers blob gas. This proposal aims to consolidate both mechanisms under the EIP-4844 framework, providing better control over long-term resource consumption.

The multidimensional fee market design allows Ethereum to better adapt to temporary demand spikes while maintaining price stability across various resources.

The first step in the rollout would be to apply this system to calldata, which often affects transaction propagation speed. From there, additional EVM resources could be added over time, using mechanisms that maintain backward compatibility.

Ultimately, this proposal would simplify the user experience and enable more scalability in the future. It would also consolidate fee structures and enable more flexible pricing, laying the groundwork for more predictable and efficient network activity.

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The transaction will not be cancelled and there will be no refunds. However, senders don’t have to wait for anything to happen, at least in theory, before trying to use their money in a different way.

When a user broadcasts a transaction, it represents an attempt to move the coins involved. Once that transaction is confirmed, everyone will agree that it happened. But before we confirm, it’s a matter of perspective. Usually, the sender wallet deals with coins as soon as a transaction is created, but as far as blockchain is concerned, they still reside in the sender wallet.

This protocol does not prevent the sender from creating another transaction that uses the same coin. Therefore, it inevitably competes with the first coin (via a principle called Alternate Buy (RBF)). Some wallets allow RBFs only to increase the fees for transactions that are too slow, but some wallets allow users to “waive” non-confident transactions in situations where they allow them to spend their funds in different ways, in some circumstances.

In short, there is no refund. Because as far as networks are concerned, non-traditional transactions simply aren’t. It happened. It’s a question of how to deal with it for the sender’s wallet.