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Cardano, as opposed to Ethereum, has a fixed transaction fee (currently 0.17ADA). There has been no problem with this fixed fee and no-one tried to cheat. Probably it is because there is not much to get from cheating, because it seems to me that stake pool could cheat the fixed cost if they wanted to:

  • For example, Binance holds a big part of the stake. So, they could offer you a refund for say 50% of your fees if you do your transaction with them (instead of sending your transaction to the network, you send it to them). So you would have to wait a little bit (but not so much) but you would get lower transaction fees. Binance would receive more transactions to handle, but if they have at least roughly twice more transactions it is profitable for them.

  • If the network becomes saturated, stake pools will be able to ask people to pay a subscription fee to see their transactions processed.

I think there is not much of a mechanism to prevent that to happen. Is there?

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The reward for Stake Pool Operator (SPO) depends upon three factors :-

  • Amount of ADA Pledged by the SPO
  • Deligation from other wallets
  • Percentage he sets while registering the pool. The reward is calculated by the network in a decentralized manner and paid to the relevant address. This reward does not depend on the fees included in the transactions forming part of the block minted by a SPO. For example in a block even if there is no transaction he still gets his reward.

Therefore there is no incentive for selecting transactions that include a higher fee. The transactions which will be from part of a part are selected irrespective of the number of fees in them. This is a major improvement over Bitcoin protocol which had a utopian view that few minors will include transactions with 0 fees. The fee decoupling from the network consensus mechanism is a major innovation of the ouroboros protocol.

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  • No I think you are wrong for two reasons. First, the fees are taken into account in the SPO reward. They are just not significant now because the issuance rewards are way higher. Second, if the number of transaction are saturated, they can use any off-chain channel to make people pay higher fees.
    – Distic
    Commented Aug 27, 2021 at 15:44
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    This link explains the formula for calculating the rewards forum.cardano.org/t/…. I could see no component of the fees of transactions processed by a particular node. R is the total reward available for epoch which is made up of complete fees collected and inflation component. Moreover, an off-chain channel makes no sense since after 20 seconds a block is likely to clear the transaction with network fees. If more than 50 %(in terms of stake) of pool owners join a cartel then it's a different story.
    – raghu
    Commented Aug 27, 2021 at 19:02
  • So now I understand better what you meant by "This reward does not depend on the fees included in the transactions forming part of the block minted by a SPO.". It explains that the SPO cannot offer to take transactions with significantly lower fees (which might be the problem right now). But it does not explain why the SPO could not ask (off-chain) for higher fees once there are much more transactions (which is not the case right now).
    – Distic
    Commented Aug 28, 2021 at 4:30
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There is no benefit to any SPO to try and put transactions into the blocks they create. All transaction fees are aggregated at the end of the epoch then distributed proportionally to SPOs based on number of blocks created in that epoch.

You can have a centralized actor like Binance be a payment processor, they can construct transactions with multiple outputs which tend to be smaller per payment, but it would only help if your funds were already in Binance, which is bad for you.

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