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Update 20230323-transaction-fee.md #266

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Updating data


## **Final Word**

Transaction fees offer many benefits in Flow network’s economic design, including compensating the node operators for the resources deployed to process transactions and secure the network, protecting the network against spamming attacks, and generating long-term stability in the Flow economy via reduced inflation. In a mature state, transaction fees should allow the Flow blockchain to self-regulate transaction throughput in a way where it would always approach optimal throughput. This proposal however is meant to be a starting point for community discussions on how an increase in inclusion fees and unit cost of execution effort could lead to network-wide benefits including economically deterring network attacks and strengthening the overall FLOW economy. The community is invited to share feedback on this post and help shape the economics of FLOW.

## **Appendix 1**

**Comparison** **of** **Flow v/s Solana transaction fees (current scenario) for specific transaction types**
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why remove?

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Removed this because first, we need to wait for Crescendo launch for real data from mainnet transactions broken down by type, and second, Solana's prioritization fee wasn't considered in the analysis as it's hard to average it out by transaction types. I can explain this more in our conversations with the community but including this table in the FLIP no longer makes sense as the data wouldn't be correct

@@ -71,44 +71,24 @@ Second, while this proposal by itself will only marginally reduce inflation (fro

![TPS-vs-Inflation](TPS-vs-Inflation.png)

Third, this change would make FLOW’s use-cases more perceptible and established, further accentuating its stature as a token of value. The table below shows the average transaction fees of various networks vis-a-vis Flow in the current and proposed scenarios. Simply put, for every dollar that users would pay to transact on the Flow network, they currently pay $450 on NEAR, $300 on Solana, and $480,000 on ETH - for the same transaction(s). This differential would reduce 100x with the approval and implementation of this proposal, yet even with the implementation of the new fee structure, Flow would continue to remain an economically attractive network to transact on. Note that given FLOW market price’s high correlation with the listed tokens’ prices (”R” averaging 0.8+), even a change in FLOW token price or stochastic market volatility would not substantially alter the competitiveness of the proposed Flow fees compared to other networks, as can be seen in the last two columns of the table below.
Third, this change would make FLOW’s use-cases more perceptible and established, further accentuating its stature as a token of value. The table below shows the average transaction fees of various networks vis-a-vis Flow in the current and proposed scenarios. Simply put, for every dollar that users would pay to transact on the Flow network, they currently pay $300 on NEAR, $4890 on Solana, and $270,000 on ETH - for the same transaction(s). This differential would reduce 100x with the approval and implementation of this proposal, yet even with the implementation of the new fee structure, Flow would continue to remain an economically attractive network to transact on. Note that given FLOW market price’s high correlation with the listed tokens’ prices (”R” averaging 0.8+), even a change in FLOW token price or stochastic market volatility would not substantially alter the competitiveness of the proposed Flow fees compared to other networks.
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Note that given FLOW market price’s high correlation with the listed tokens’ prices (”R” averaging 0.8+)

In scientific literature, it is generally discouraged to use symbols (such as R) without precise definition. While there are often commonly used symbols for some specific quantity, these conventions may change over time. Furthermore, given only the symbol, it is often highly non-trivial to figure out what specific quantity is meant.

I assume with R you mean the Pearson's correlation coefficient? Furthermore, not sure what you mean with "averaging", because Pearson's correlation coefficient is usually defined for a sample. Do you mean you average over different tokens? I would just remove the "average".

Suggestion:

Suggested change
Third, this change would make FLOW’s use-cases more perceptible and established, further accentuating its stature as a token of value. The table below shows the average transaction fees of various networks vis-a-vis Flow in the current and proposed scenarios. Simply put, for every dollar that users would pay to transact on the Flow network, they currently pay $300 on NEAR, $4890 on Solana, and $270,000 on ETH - for the same transaction(s). This differential would reduce 100x with the approval and implementation of this proposal, yet even with the implementation of the new fee structure, Flow would continue to remain an economically attractive network to transact on. Note that given FLOW market price’s high correlation with the listed tokens’ prices (”R” averaging 0.8+), even a change in FLOW token price or stochastic market volatility would not substantially alter the competitiveness of the proposed Flow fees compared to other networks.
Third, this change would make FLOW’s use-cases more perceptible and established, further accentuating its stature as a token of value. The table below shows the average transaction fees of various networks vis-a-vis Flow in the current and proposed scenarios. Simply put, for every dollar that users would pay to transact on the Flow network, they currently pay $300 on NEAR, $4890 on Solana, and $270,000 on ETH - for the same transaction(s). This differential would reduce 100x with the approval and implementation of this proposal, yet even with the implementation of the new fee structure, Flow would continue to remain an economically attractive network to transact on. Note that given FLOW market price’s high correlation with the listed tokens’ prices (Pearson's correlation coefficient of 0.8+), even a change in FLOW token price or stochastic market volatility would not substantially alter the competitiveness of the proposed Flow fees compared to other networks.

| Optimism | $ 1.02E-01 | 8,719 times | $ 1.02E-01 | 87 times |
| Polygon | $ 1.00E-02 | 856 times | $ 1.00E-02 | 9 times |
| Solana | $ 5.71E-02 | 4,891 times | $ 5.71E-02 | 49 times |
| Flow | $ 1.17E-05 | N/A | $ 1.17E-03 | N/A |

## **Final Word**

Transaction fees offer many benefits in Flow network’s economic design, including compensating the node operators for the resources deployed to process transactions and secure the network, protecting the network against spamming attacks, and generating long-term stability in the Flow economy via reduced inflation. In a mature state, transaction fees should allow the Flow blockchain to self-regulate transaction throughput in a way where it would always approach optimal throughput. This proposal however is meant to be a starting point for community discussions on how an increase in inclusion fees and unit cost of execution effort could lead to network-wide benefits including economically deterring network attacks and strengthening the overall FLOW economy. The community is invited to share feedback on this post and help shape the economics of FLOW.
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@AlexHentschel AlexHentschel May 22, 2024

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In a mature state, transaction fees should allow the Flow blockchain to self-regulate transaction throughput in a way where it would always approach optimal throughput.

I feel there is a lot of ambiguity in this sentence:

  • The network itself cannot properly regulate transaction throughput. It cannot add transactions if the network is under-utilized and we don't really want the network to drop transactions if it is overloaded.

My guess what you mean is something like the following:

Suggested change
Transaction fees offer many benefits in Flow network’s economic design, including compensating the node operators for the resources deployed to process transactions and secure the network, protecting the network against spamming attacks, and generating long-term stability in the Flow economy via reduced inflation. In a mature state, transaction fees should allow the Flow blockchain to self-regulate transaction throughput in a way where it would always approach optimal throughput. This proposal however is meant to be a starting point for community discussions on how an increase in inclusion fees and unit cost of execution effort could lead to network-wide benefits including economically deterring network attacks and strengthening the overall FLOW economy. The community is invited to share feedback on this post and help shape the economics of FLOW.
Transaction fees offer many benefits in Flow network’s economic design, including compensating the node operators for the resources deployed to process transactions and secure the network, protecting the network against spamming attacks, and generating long-term stability in the Flow economy via reduced inflation. In a mature state, the network would autonomously adjust transaction pricing such that its throughput approaches the optimum. This proposal however is meant to be a starting point for community discussions on how an increase in inclusion fees and unit cost of execution effort could lead to network-wide benefits including economically deterring network attacks and strengthening the overall FLOW economy. The community is invited to share feedback on this post and help shape the economics of FLOW.

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