FLIP 74 - Revisiting Flow Transaction Fee

Revisiting Flow Transaction Fee

Status Proposed
FLIP # 74
Author(s) Kshitij Chaudhary (kshitij.chaudhary@dapperlabs.com)
Sponsor Kshitij Chaudhary (kshitij.chaudhary@dapperlabs.com)
FLIP Document https://github.com/onflow/flips/pull/74

In early days of the Flow network, when the number of transactions were fewer, transaction fees were intentionally kept low to encourage network usage. Today however, with Flow’s purpose-built compute platform and web3 utility for the masses driving a growing user-base on the network, there is a need to revisit the fees. This FLIP proposes an increase in transaction fee and seeks community feedback on the proposed changes.

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Hi everyone, those of you who don’t know me, I’m a Sr Product Manager in Flow protocol team, leading Tokenomics and Governance related activities required to scale Flow to greater security, decentralization, mass adoption, and long-term economic stability. I look forward to your critical feedback on this proposal, and together, shape the economics and future of Flow. Thank you!

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This is really a great idea, and very good work. I just went over it quickly, but I fully support. Thank you for the detailed FLIP @kshitij.chaudhary

In general, I like the proposal combined with FLIP 66 related to account storage.

What would be interesting imo is to add in the comparison with other alt L1 is the transaction fee for ETH L2. One of the biggest narratives for L2s is how cheap the transaction fees are. It would be great to see with this new proposal how Flow transaction fee model is compared to: Immutable, Polygon/Polygon Zkevm (launching next week), Arbitrum (launched this week) for example


I believe we should aim to remain the cheapest by a magnitude of 10 and taking into account potential for a 10-100x price increase as well, if flow goes to $100 we all happy anyhow and things going well, but lets also aim to be open then to decreasing the price of transactions to remain not just competitive but the cheapest.

@kshitij.chaudhary another aspect I haven’t seen in the FLIP: are the transaction fees going to be paid to the node’s operators (as stated in the Flow whitepaper) now in order to decrease the inflation rate ?
I believe we need to start to act on the inflation aspects of the protocol economics even if it’s negligible at this stage

Thanks @bluesign

Hi @Redallica, thanks for the comments.

Its complex imo to compare FLOW fee to L2s as they operate under different conditions, but here is a comparison - according to https://polygonscan.com - 45,000+ MATIC were collected yesterday (range between 25K-70K in the past few months) across 2.88M daily txns - costing an average of 0.016 MATIC or $0.02 (2 cents/txn) - this is ~14.8x what FLOW would charge post the 100x increase.
IMX charges a “Meta-transaction fee” - used to cover gas (behind the scenes) for txns that occur on eth mainnet. This is typically a small fraction (0.1%) of the total transaction value. I’m yet to go through Arbitrum papers but will get back to you on that!

On your second question - yes, transaction fees are already paid to the node operators as stated in the Flow whitepaper. The protocol first draws from the “collected transaction fee pot”, computes the gap [target reward tokens minus fee collected in that epoch], and then issues new tokens equivalent to the gap. Thus I’d called this FLIP a baby step towards addressing inflation (or paving path for it), though I’m also working on proposing how inflation could be lowered by addressing other factors.

Hi @TraderFlow
Thanks for your feedback. Like I stated under “impact” section (point #3), imo Flow would continue to remain competitive and economically attractive, given the high correlation b/w token price of FLOW and other networks. A substantial change in FLOW token price is expected to happen in parallel to a “quite substantial” change in token prices of other chains, making sure that we continue to remain similarly “competitive, but cheap”, like shown in the table above “final word” section of the FLIP document. However, like you said, we must remain open as a community to revisit these fees based on market conditions!

Hi everyone, thanks for your critical feedback on this proposal. We are now taking this proposal live for on-chain voting and democratic deliberation by the community. Please cast your vote on CAST between today and 05/22 (until 22.00 UTC). Reach out to me on discord (KshitijChaudhary-FLOW#8777) or here on forum if you have any questions regarding casting a vote. Thanks for helping shape the economics and future of Flow!

UPDATE: Hi everyone, after careful consideration, we decided to postpone the two Tokenomics proposals. In the interest of ensuring a well-informed and inclusive decision-making process, we believe the community would benefit from additional dialog. I’ll be in touch soon regarding next steps and seek your feedback. Thanks for participating in the economics and future of Flow!

Hi Kshitij,
thank you for the update.

Can you share what community feedback has previously been missed?

I understand the topic is not straightforward. However, the proposals not surviving a single day in the open raises a lot of questions about Dapper/Flow’s ability to drive change on the network.

Can you share some insight into the current thinking of the team?

E.g. what are the priorities for the network’s development short- and mid-term, how do the 2 proposals help getting there, what more FLIPs do you see necessary in the next 1-2 years?


Any update on this proposal? I’m still in support of the increase in Fees and it would be great to get this moving again

Hey yes, taking this to a community vote is still the plan, but we are first planning to enable some FLOW holding institutions to vote on the FLIP (directly instead of via their custodians) before we take this to vote. Happy to explain more in the next TWG meeting!