Thanks for introducing this RFC @Ash! Although I strongly agree that as a community we should aim to increase the utility of the CFG token, I don’t believe that we should be setting transaction fees based on the utility it can provide.
The main goal of transaction fees is security: charging blockchain users a cost that prevents spamming the chain (i.e. prevents Denial of Service attacks). Builders of Substrate-based blockchains use benchmarking for this. With this method, the aim is to calculate transaction weights that represent the computation and storage cost as accurately as possible. These weights are then converted into the actual fee (in the native token of the chain) using a predefined conversion in the runtime. Now, my hunch is, it’s this conversion that likely differs from other parachains and this is why the fees (e.g. for transferring native tokens) are significantly lower.
I haven’t looked into this too closely yet, and I think we definitely should find some time to look into this. But we should define this conversion based on what is economically sufficient to prevent spam, not based on how much utility the fees would provide. The reason for this is: we should think about what kind of costs actors in our ecosystem should want to incur. Going through the recent utility proposal, I think #1 Protocol Fees is particularly interesting.
As an example: say the Centrifuge Protocol grows significantly in the next years, blocks start to be filled, and fees go up significantly due to increased demand, as well as due to the 100x increase in conversion that this proposal would lead to. This would mean that any interaction with a pool has a high cost, which in turn leads to an incentive to reduce the number of interactions. One effect this can have is that issuers are incentivized to bundle assets and create larger assets within a pool, leading to a lack of transparency on-chain about the portfolio of a pool. It could also disproportionately impact SMEs using the protocol, as the start-up costs of launching a pool would be higher.
Now, it’s worth saying that this is certainly a hypothetical scenario: currently transaction fees are still low that even a 100x increase would not have this effect. But I think the principle does already apply. If instead of increasing transaction fees, we focus on increasing usage of the blockchain (by growing the Centrifuge ecosystem) and introducing Protocol Fees, this would lead to the issuers paying a fee relative to the value of the pool.
To summarize, I think if we want to grow utility of the CFG token, we should:
- aim to grow the usage of the blockchain first (i.e. launch Pools on Centrifuge Chain and make this a success);
- enable protocol fees that scale based on the value of a pool;
- and set transaction fees such that they discourage spam, but encourage valuable interactions with the blockchain.
I do agree that we should take a closer look at the conversion, whether this is set up correctly relative to other parachains, and I can find some time for this in the next few weeks and share my findings back in the forum.
