Fixed fee

A single fee amount that is the same across any transaction

A fixed fee means that the cost of a transaction is the same regardless of the value of the transaction. Fixed fees have the inherent problem that they tax the poorest people in the network the most and give the most benefit to the wealthiest individuals who create the largest transactions. Smaller transactions have a higher percentage fee over larger transactions that get the same fixed price. To make an ecosystem more egalitarian it is desirable to minimise the unfair economic impact of fixed fees by reducing or removing fixed fees where possible.

Very low taxation fairness (Score - 1)

Fixed fees tax the poorest the most and reward the richest the most due to the differences in the percentage cost for transacting with different amounts of assets. The percentage fee amount that someone pays will decrease as the transaction value increases. A fixed fee approach can make it easier for wealthier people to maintain their wealth as they proportionally are more easily able to pay less than anyone else when making high value transactions. The poorest individuals could also have the hardest time when trying to increase their wealth due to the higher taxation on their smaller transactions.

Moderate incentive complexity (Score - 3)

Wealthier individuals have an incentive to take advantage of the cheap fees by making many transactions if that means they could get some form of edge or advantage financially. Wealthier individuals are incentivised to exploit their position of being able to make cheaper transactions relative to the wealth they are moving around. Poorer individuals in the ecosystem have an incentive to move to other ecosystems that have fairer transaction fee models due to the higher costs. Poorer individuals could represent the majority of the population meaning this could be a reason why a given network fails over time as the network did not represent the interests of the majority of the population.

Moderate network risks (Score - 3)

There are network risks for situations where the wealthier individuals have an increasing amount of wealth over time as their network fees they generate for the network wouldn’t necessarily increase. More wealth in less hands could mean that less transaction fees are generated to pay for operating and securing the network. There is an ongoing risk that the individuals with less wealth find cheaper alternatives to a network with fixed fees which could jeopardise the viability of the network over the long term due to the difficulty in generating enough fees to pay for the network.

Moderate game theory risks (Score - 3)

Wealthier individuals could try to exploit the fact that their transaction fees are cheap relative to their wealth. They could decide to spam the network with transactions to achieve a certain outcome whether that’s for some financial benefit or to harm certain individuals or the network. This attack could be fairly cheap to the wealthiest individuals and very repeatable due to the fixed fee approach and a very small cost relative to their wealth.

Total - 10 / 20

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