From 0917899895713c836501f2363bf4dfd4fd7cbd10 Mon Sep 17 00:00:00 2001 From: Paul Dann Date: Wed, 4 Sep 2024 17:11:03 +0100 Subject: [PATCH] ZIP-235: Deposit 60% of transaction fees to the ZSF --- zips/zip-0235.md | 151 +++++++++++++++++++++++++++++++++++++++++++++++ 1 file changed, 151 insertions(+) create mode 100644 zips/zip-0235.md diff --git a/zips/zip-0235.md b/zips/zip-0235.md new file mode 100644 index 000000000..1c92d1df0 --- /dev/null +++ b/zips/zip-0235.md @@ -0,0 +1,151 @@ +``` +ZIP: 235 +Title: Burn 60% of Transaction Fees +Owners: Jason McGee + Zooko Wilcox + Tomek Piotrowski + Mariusz Pilarek + Paul Dann +Original-Authors: Nathan Wilcox +Credits: +Status: Draft +Category: Ecosystem +Created: 2023-09-21 +License: BSD-2-Clause +``` + +# Terminology + +The key words “MUST”, “SHOULD”, “SHOULD NOT”, “MAY”, “RECOMMENDED”, “OPTIONAL”, +and “REQUIRED” in this document are to be interpreted as described in RFC 2119. +[1] + +The term “network upgrade” in this document is to be interpreted as described in +ZIP 200. [2] + +"Block Subsidy” - the algorithmic issuance of ZEC on block creation. Part of the +consensus rules. Split between the miner and the Dev Fund. Also known as Block +Reward. + +"Issuance" - The method by which ZEC becomes available for circulation on the +network. + +“We” - the ZIP authors, owners listed in the above front matter + +# Abstract + +We propose to burn 60% of transaction fees, while the remaining 40% be directed +as before, providing a deflationary effect, and building the groundwork for +long-term support of the Zcash network via the new block subsidy rules proposed +by ZIP-234. + +# Motivation + +ZIP-233 ("Network Sustainability Mechanism: Burning") describes a method by +which ZEC can be burned to support network sustainability. + +By introducing a requirement that a certain proportion of transaction fees be +burned, we ensure that ZEC will be removed from circulating supply to contribute +to the long-term sustainability of the network as described below: + +## Benefits to the Network + +1. **Network Sustainability**: This mechanism involves temporarily reducing the + supply of ZEC, similar to asset burning in Ethereum’s EIP-1559, but with + long-term sustainability benefits, as the burned funds effectively boost + future mining rewards, making it an attractive option for current and future + Zcash users. +2. **Incentivizing Transaction Inclusion**: By maintaining a 40% share of + transaction fees for miners, we continue incentivizing miners to prioritize + including transactions in their blocks. This helps ensure the continued + efficient processing of transactions and supports a robust and responsive + network. +3. **Aligning Interests:** Burning transaction fees aligns the interests + of miners with the long-term health of the network, incentivizing them + to prioritize security and efficiency. As miners focus on maintaining a + robust network, overall adoption and usage can increase, leading to higher + transaction volumes in the long run. This structure discourages short-term + profit-seeking behaviors, as miners benefit more from a stable and thriving + ecosystem than from engaging in malicious activities that could undermine the + network's reputation and security. +4. **Future-Proofing the Network**: Burning a portion of transaction fees + is a forward-looking approach that prepares the Zcash network for future + challenges and opportunities. It establishes a financial buffer that can be + instrumental in addressing unforeseen issues and seizing strategic advantages + as the Zcash ecosystem evolves. + +# Requirements + +* For each block, at least 60% (rounded down) of the total fees are to be +burned. +* No restrictions are placed on the destination of the remaining proportion of +fees. +* Any fractions are rounded in favor of the miner. + +# Specification + +## Consensus Rule Changes + +For a given block, the coinbase transaction MUST have a `burnAmount` that is +greater than or equal to `floor(transactionFees * 6 / 10)`. + +Previous transaction versions are not supported for coinbase transactions, due +to there being no explicit mechanism to burn the required funds. + +# Deployment + +The implementation of this ZIP MUST be deployed at the same time or after +ZIP-233 ("NSM: Burning"), and ZIP-234 ("NSM: Issuance Smoothing"). + +# Rationale + +We believe the proposed changes to be relatively low-impact in terms of +implementation and protocol changes. Additionally, transaction fees are +currently small enough that the reduction in miner fees is unlikely to be a +concern. + +## Estimated impact on miners + +Over 100,000 blocks starting at block 2235515, there were 316130 transactions. +60608 of them are categorized as 'sandblasting' transactions. The remaining +transactions have an average of 5.46 logical actions (see ZIP-317 [4]). + +The total fees paid to miners from those transactions, assuming the ZIP-317 +regime, would be 87.86 ZEC. 100,000 blocks is approximately 3 months of blocks. +Extrapolating to a year, we would expect 351.44 ZEC in fees paid to miners over +a year. + +If 60% of these fees burned, that would be 210.864 ZEC per year. [5] + +## Considerations for the Future + +If transaction fees were to increase, further modifications can easily be +proposed to alter the 60%/40% split. Finding the optimal fee split may require +an iterative approach involving adjustments based on real-world data and network +dynamics. + +Looking further into the future, there may come a time when the transaction fees +become greater than the block subsidy issuance. At that time we may need to +reconsider the 60/40 split. However, this will likely not be the case for the +next 8-10 years due to forecasts based on issuance models and network traffic. + +Further ZIPs may be proposed to burn ZEC in various ways to support network +sustainability, including but not limited to: + +- ZSA fees +- Fees and donations specific to decentralized applications +- “Storage fees” for any future data availability +- Cross-chain bridge usage / Cross-chain messaging +- Note sorting micro-transactional fees + +# References + +[1] RFC-2119: https://datatracker.ietf.org/doc/html/rfc2119 + +[2] ZIP 200: [Network Upgrade Mechanism](zip-0200.rst) + +[3] ZIP 233: [Establish the Zcash Sustainability Fund on the Protocol Level](zip-0233.md) + +[4] ZIP 317: [Proportional Transfer Fee Mechanism](zip-0317.rst) + +[5] https://github.com/eigerco/zsf-fee-estimator