…have been increasing a lot of late. In fact even with the recent increase in block size from 64kB to 72 kB (an increase of 8kB or 12%) there are periods where mempool is saturated and transactions are queued before being processed.
And while this is a good thing as it shows Cardano adoption is accelerating, this has naturally triggered some debate on how this should be addressed longer term and whether some form of tiered pricing is required depending on the service level needed. After all some transactions are critical and need to be completed in a certain time period, but many are not and can processed with a lower priority.
Furthermore capacity provided must always be balanced against economic considerations to maintain and operate the network and to meet the blockchain trilemma (there is a reason some of Cardano’s competitors are not actually decentralised, something which we and many long term participants in this space see as critical).
This recent blog post by Philip Lazos, Research Fellow at Input Output, explores the topic and proposes a novel 3 tiered structure that carries many of the benefits of the current system (fixed transaction costs and fair first in, first out approach), while allowing for a tier where the price bid determines which get processed first.
As Philip notes “Decentralized finance will continue to build demand on Cardano. Our research project is looking at ways to maintain fair access and throughput for every user”.
Its a good approach that avoids the negatives of the current fee incentives on Bitcoin and Ethereum:
This mechanism is different from current pricing approaches, as used by Bitcoin or Ethereum (even with Ethereum Improvement Proposal 1559), where there is a variable fee that each transaction must exceed to make it into a block. The downside of this approach is that the fee everyone needs to pay is dictated by the ‘richest’ consumers. Even worse, this is the fee paid by the richest consumers to make it into a block ‘immediately’.https://iohk.io/en/blog/posts/2021/11/26/network-traffic-and-tiered-pricing/
By breaking the transactions submitted to the chain into three tiers; fair (50%), balanced (30%) and immediate (20%), it allows for a more nuanced incentive structure, keeping traffic flowing, and allowing fairer access to all participants.
Like decentralisation, fair access is a central tenet of the Cardano mission and it is good to see progress on how this can be maintained as the network continues to grow in the coming months and years.
Worth reading in full.