Klaytn Gas Price Adjustment Plan and Future Direction | by Klaytn | klayton | February 2022
Gas price adjustment plan
We are currently considering an adjustment between 250 tons and 750 tons for the gas price for KLAY transactions (assuming KLAY = $1.20, then a KLAY transfer would cost around $0.006 to $0.018). Based on the collected data, we have already estimated the expected results for three different price levels at 250 tons, 500 tons and 750 tons:
Assuming that arbitrageurs will maintain their trading level even after the adjustment:
- 750 tons: the cost of the referees will outweigh their benefits
- 500 tons: the cost of the referees will outweigh their benefits
- 250 tons: the cost of the referees will be almost equal to their advantages
Assuming that arbitrageurs will seek to guarantee a 100% rate of return even after the adjustment:
- 750 tons: Arbitrages using bot trades will be forced to reduce their trade levels to 15% of the current amount
- 500 ston: Arbitrages using bot trades will be forced to reduce their trade levels to 25% of the current amount
- 250 tons: Arbitrages using bot trades will be forced to reduce their trade levels to 50% of the current amount
Assuming that arbitrageurs will seek to maintain their current rate of return (900%) even after the adjustment:
- 750 tons: Arbitrages using bot trades will be forced to reduce their trade levels to 3% of the current amount
- 500 tons: Arbitrages using bot trades will be forced to reduce their trade levels to 5% of the current amount
- 250 tons: Arbitrages using bot trades will be forced to reduce their trade levels to 10% of the current amount
It can be seen from these estimates that an adjustment to 250 ston would not be sufficient to stop spam trades, as arbitrageurs would suffer no loss to maintain their current trading volume sufficiently, as the forced halving of trades would still give them high returns. A 500 ton adjustment, however, is where arbitrageurs will start to be deterred from sending bot trades en masse. But even at this level of increased fit, trading volume is only reduced to 30% while relatively high returns (around 60%) can still be generated, ensuring that at the current level this activity will occur even without considering that it is likely that robot algorithms will evolve in the future to bring slightly higher returns. Therefore, our conclusion is that To adequately reduce trading volume and reduce network congestion, taking a more proactive and cautious approach is the most desirable option by adjusting the gas price to one of the higher level options.
For the effective implementation of the price adjustment, we considered adopting an immediate or gradual approach. The first would see the price of gas increase directly to 750 tonnes or 500 tonnes, while the second would increase the price in stages over a longer period, for example from 100 tonnes, to 200 tonnes and then 300 tonnes. The advantages of each option can be summarized as follows:
- Immediate increase: more effective solution against spam transactions
- Gradual increase: Less burden caused by drastic gas price increases
A gradual adjustment will put less pressure on the gas price, but it may not be a strong enough solution against short-term spam trades. Another area of concern is the confusion and inconvenience to the Klaytn community should the gas price increase be applied multiple times. Considering these aspects, we believe an immediate one-time increase seems to be the most desirable option.
The gas price increase will be accompanied by the gas pricing policy as defined below:
Orientation of the gas price policy
The Klaytn team is looking at various possibilities to allow more network and ecosystem contributors to benefit from Klaytn’s growth. Here are the points that we believe will best serve the community in the future.
All newly adjusted gas charges will be burned.
Only the gas price calculated with the existing 25 tons will be used as KGF, KIR resources as well as GC rewards. Any portion of the adjusted amount that exceeds this base price will be 100% burned. We want to emphasize that the purpose of the price increase is to “promote the fair and efficient use of the Klaytn network”.
A fee-burning mechanism to maintain the value of KLAY will soon be implemented.
The Klaytn team strongly believes that our ecosystem will expand and thrive, and we are doing our best to make it happen. In the process of ecosystem growth, the total gas royalty is bound to increase, so a deflationary mechanism to maintain and sustain the value of KLAY is needed. We appreciate the community’s patience with us on this. We want this mechanism to be precise, stable and achieve our common goals. We promise to bring you a proper combustion mechanism that best serves the ecosystem once it is ready.
We want a dynamic and deterministic pricing policy over the long term
Dynamic fee policy
Network stability is severely compromised during transaction peaks. Most transactions are initiated by a few entities, but the consequences are borne by the vast majority of unsuspecting users, who would have to wait longer for a transaction to be processed. To reduce the incentives to create skyrocketing transaction volumes, we want to implement a dynamic pricing policy where prices change based on transactions. On top of that, the volume of organic transactions can create the same problem in the future. If we have a mechanism that incentivizes dealing with transactions that “must be prioritized even at the cost of high gas charges, spam transactions generated by bots and other lower priority transactions are likely to decline at such times. Later, as fewer transactions compete for network resources, the price of gas will naturally return to its previous level.
Deterministic fee policy
If Klaytn ecosystem developers cannot reliably estimate the price of gas, it could become a source of big inconvenience for developers and users. The Klaytn team wants to solve this problem by keeping a deterministic fee policy. For example, the price of gas for a block could be determined based on the total gas used for X number of blocks in the previous month. (Example: if the total gas used for the last 10 blocks exceeds 90% of a certain threshold, the gas price of the next block increases by the square root of 1.5). Additionally, we will include measures (eg some level of randomness) to prevent any instances of abuse that might occur with a 100% deterministic policy.