Demand fee

A proportional fee increase for all transactions when the networks demand is too high

A demand fee is an additive fee model that could be used alongside the fixed fee approach. A demand fee means that the network would dynamically increase the transaction fee amount when the number of transactions submitted becomes too high for the network to process in the short term.

A demand fee could benefit from having a fixed fee increase and a percentage fee increase as this could prevent wealthier users from constantly bloating the network with transactions and then making large value transactions that benefit from a proportionally smaller fee whilst others struggle to pay for the increased demand fee. A percentage fee being included could help with reducing the impact of wealthier individuals being able to easily spam the network.

Demand fees could be an effective approach for balancing network demand as users would be incentivised to avoid the increased fees and use the network when it is cheapest to do so if they are able to. Demand based fees could also help with increasing the amount of treasury income that the network receives.

A demand fee is not a desirable fee model to introduce into a network. Demand fees are not necessarily required for a network that is able to scale and handle a growing amount of transaction volume. Sharded ledgers that are horizontally scalable could represent a solution that means additional fee models such as a demand fee might not be necessary.

High taxation fairness (Score - 4)

Demand based fees can help to balance the future demand on the network as people will use the network when it makes most sense to do so based on their own requirements and use cases. Percentage demand fees would mean that a user would pay an increased fee proportional to the value of the assets they are transacting with. This can help to avoid the issues that a fixed fee approach could have where the wealthiest individuals would get the lowest percentage cost basis. Under a mixed fixed fee and percentage fee approach, all users would be treated as equally as possible.

Moderate incentive complexity (Score - 3)

If a percentage fee was part of the demand fee, everyone would proportionally pay an increased amount for their transactions when the network's demand exceeded a certain threshold. The higher the demand fee, the more that this could be problematic for the rest of the users. Higher demand fees could increase the amount of people that look to avoid these fees by delaying their transactions or by finding other networks that they can use that are cheaper. An incentive could exist for wealthier individuals to make many smaller transactions that bloat the network if that behaviour led to any financial benefit for them by preventing others from transacting.

Horizontally scalable networks could minimise this risk of people bloating the network for financial gain by ensuring that increasing levels of demand led to incentives that brought on more nodes that could handle a larger amount of transaction throughput.

Moderate network risks (Score - 3)

A demand based fee helps to reduce network risks by adjusting the fees based on the demand in the network. This creates a higher cost for attackers who want to bloat the network and creates a direct incentive for users to balance the load of transactions over a longer time period to avoid these increased fees. This approach can still have a moderate amount of network stability risks due to the implications of wealthier individuals potentially being able to bloat the network and prevent poorer users from using the network. If the fixed fee increase isn’t high enough it becomes a potential attack vector, if it is too high then users would be more incentivised to look for alternative networks.

Total score = 10 / 15