Vitalik Buterin Proposes Fixed Fees That Can Act as Block Reward

Vitalik Buterin has put forth a suggestion to change the current highest fee auction model for transaction inclusion to a fixed fee model.

In opening a Github “issue” in Zcash, Buterin says the proposal is relevant to most public blockchains and is being considered in ethereum.

The idea is to replace the current volatile fee calculations with a protocol rule that sets the fee at a certain level, combined with a formula that allows that to change depending on capacity.

“If the last block was 50% full, leave the fee unchanged, if the last block was 10% full, drop it by 10%, if the last block was 90% full, increase it by 10%,” Buterin says.

Under this design miners would pay a fee of x per byte or gas or whatever unit, with that fee going to a distribution pot that is then equally distributed to miners.

Buterin says miners or stakers wouldn’t process fees below x, but it is unclear why they wouldn’t process fees above x unless x is the maximum fee they can charge.

He references CRYPTO 2018, where he gave a keynote speech at an affiliated event, yet as far as we can see it doesn’t seem to elaborate much on this specific proposal. Buterin says:

“It replaces the auction with a fixed price sale (except during short periods where blocks fill up completely until fees catch up), eliminating first-price-auction inefficiencies and making fee estimation extremely simple: calculate the fee f for the next block, if you can afford it pay it, otherwise don’t.”

Yet how this fee price would be fixed exactly is unclear. The conclusion however is interesting because Buterin has previously suggested a cap in ethereum’s supply, he says:

“In every block, a miner gets a reward equal to 1/N (eg. 1/10000) of the money remaining in the pot (note that this amount does NOT depend on the transactions they include in their block)…

It creates a mechanism similar to a permanent block reward (the 1/N coming from the pot), mitigating many of the instability issues with fee-only blockchains without requiring actual permanent issuance.”

That’s basically communalizing transaction processing so that instead of miners competing with each other regarding what transaction they process, they all share the fees rather than directly getting paid by transaction fees.

In effect thus the fees become a fixed block reward of sorts, in theory. Achieving that in practice, even conceptually, is a different matter because someone has to fix the fee, and someone has to adapt that fee to changing circumstances, and that would give that someone considerable sway.

Suggesting that this is very much a very initial proposal that needs considerable fleshing out and perhaps some significant modeling so as to make it all algorithmic which sounds difficult to say the least.

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