What stops Algorand transaction fees from becoming too high?

Hi everyone, if I understood correctly the Algorand transaction fees are pegged at 0.001 Algorand per transaction. What happens if in the future Algorand is worth 100$? Then 0.001 becomes quite high and could be a burden to the ecosystem. What are the solutions for such a scenario?

hey there - if that were to occur, that would come as an economic proposal that the community would weigh in on and would probably come from the Algorand Foundation.

Hi Paul, thank you for the reply. Thinking out loud here: Wouldn’t there be a big chance that such a proposal is rejected by the community because this would effectively lower the staking rewards? There seem to be some conflicting interests if it were to come this far. Who would have the last say in such a case? The holders/stakers, the node operators, the users, or the foundation?

If Algorand would get to Ethereum’s current marketcap, that would mean a 120x increase in price, translating to transaction fees of around 3c per transaction. Still relatively cheap, but probably too expensive for mass adoption as a universal currency.

@petew Could you please explain why you believe changing the transaction fees would directly effect the staking rewards ? AFAIK, these are two separate accounts - the fee sink is completely separated from the rewards pool.
It’s true that a future protocol could potentially change that, but I wouldn’t speculate about this: the Algorand foundation already declared the amount of rewards they plan to distribute for the coming years. I’m pretty that these funds have already been preallocated.

@tsachi If those are separate accounts, who controls the fee sink then? If the Algorand foundation controls the fee sink, that would mean Algorand is still centralized. I can’t find anything about this separation in the white paper or token dynamics.

I have read about the participation rewards, but there will come a time that the foundations runs out of those, then the only thing left will be transaction fees. What will be the incentive for people to stake then?

@petew,

I believe that with the current protocol, the fee sink can only be spent into the reward pool.
However, this is not an automated process, and need to be invoked by sending a payment transaction.

AFAIK, no such a transfer was done so far. Note that when having the rewards being funded by the fee sink means that the network won’t have guaranteed staking anymore. ( i.e. because the amount of fees is not guaranteed )