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It's obviously a lot less than Ethereum's, but 0.17 ADA isn't insignificant. What are the main reasons it can't be 0.00017 ADA?

I understand that the parameters are configurable over time, but has it really changed since 1 ADA = $0.10 until now? How exactly have IOHK determined that 0.17 is the right amount for now? If it is because it matches the cost of running the network - where can I see that calculation?

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If you have fixed market cap (45 Billion out of which 31 B in circulation) you need to have transaction fees to cover the cost of running the network (Stake Pool Operators and all people who are delegating their coins to the SPOs). If you don't have fixed market cap you can afford to cover all the costs by fixed/dynamic yearly inflation. But again: someone/something needs to cover the network costs. Nothing is free.

In our case the transaction fee at the moment is adjusted from time to time based on the price of ADA. If ADA goes up then the transaction fee goes down so that can be around 0.2$.

Later once Catalyst is more mature these parameters (including the topic about the fixed market cap) can be discussed and we will be able to vote on it. :)

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    However, the market cap is fixed but the limit is not reached yet. So in effect the costs are also covered by the issuance of new coins for now...
    – Distic
    Commented May 29, 2021 at 17:04
  • Yes, totally right. Thank you that you added this additional important information.
    – Petar Enchev
    Commented May 30, 2021 at 13:24
  • Thanks for the answer, added a few more details to the question to be more specific. I understand that the parameters are configurable over time, but has it really changed since 1 ADA = $0.10 until now? How exactly have IOHK determined that 0.17 is the right amount for now? If it is because it matches the cost of running the network - where can I see that calculation?
    – Defi Checker
    Commented Jun 1, 2021 at 22:24
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    As far as I know the parameters are adjusted so that the value of a transaction is to be around 0.2$. One of the reasons for is DDOS attack and also to cover the cost of the network (over time after all coins are in circulation these fees should cover all the costs of the SPOs and the delegators). So, yes, I remember that back at the time the trasaction fee was 1 ADA. Then over time based on the current value of ADA they changed that to correspond to ~0.2$ per transaction.
    – Petar Enchev
    Commented Jun 2, 2021 at 12:27
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The transaction fee is a network parameter and is subjected to governance in the future. There is a cost for maintaining the network. Currently, there are more than 2500 stake pools that are providing the infrastructure for running Cardano. Cardano also has a treasury that is powering innovation. Treasury is also paid from the transaction fee. When the number of transactions goes up, the fees will be brought down as the governing mechanism decides.

Cardano is proof of stake based network, therefore operating cost is very low which will never result in runaway escalation in transaction fees.

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Today's fees are high, that's true. But apart from all the well-known features that the Alonzo hard fork brought, there is the beginning of the Hydra embedding. Implementing Hydra with its isomorphic state channels (Layer 2 solution) will not only help to scale the Cardano network towards 1,000,000 Tx/s but will also help to bring down fees to a sustainable level.

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