‍

tl;dr The pricing mechanism on the Concordium blockchain is undergoing an overhaul. While these technical changes are being implemented, the current transaction fees will all be temporarily reduced by a factor of 100 on the 6th of February 2024. When the new pricing mechanism is rolled out, the fees for complex smart contract calls should remain significantly lower than today, whereas the fees for simple CCD transfers are expected to return to something closer to their current rate. No transaction fees will increase beyond the current prices.

Calculating Transactions Fees

One of the distinguishing features of Concordium is that the price of transactions is fixed in euros, not in a volatile crypto currency.
This provides businesses with a lot of predictability for their costs. The exact fee that is paid for submitting a transaction to the blockchain is determined in three steps.

1. The first step consists in mapping every transaction to an amount of energy. This energy captures the cost of executing the transaction for the validators. The size of the input, the computation time, the memory requirements, and premiums for added complexity such as inter-smart contract calls are all taken into account to determine the energy of a transaction.
2. This energy is then mapped to a price in euro via a euro-per-energy parameter that is on the blockchain. This parameter is fixed, but can be changed by the Concordium governance committee.
3. Finally, an oracle that determines the current price of CCD, Concordium’s native token, is used to convert the cost in euros to CCD, which is then paid by the user submitting the transaction.

Note that the energy of a transaction is not only used to determine its price, but also whether it fits in a block: the maximum size of a block is given in energy.

The Transaction Fee Overhaul

What is currently being reworked is the first step, namely how the cost of transactions is calculated in energy. More specifically, the main change will be to the Wasm interpreter, which executes the smart-contracts on Concordium and which will be replaced by a more efficient interpreter. This means that the same transaction will take less time to execute, it will thus cost less resources to the validators to execute the transactions, so the transaction fees can also be reduced.

The result of this change will be a lower cost per transaction for the user, but the same payment received for resources used for the validators.

The second part of this change will be to reevaluate how the resources used by validators are priced. Is the balance between the cost of execution time and memory requirements correctly captured? Are the premiums for complex transactions justified? This reevaluation could result in a further reduction of transaction costs.

Finally, once we know the cost in energy of transactions after the technical changes, the euro-per-energy parameter will be revisited to guarantee that the prices of transactions on Concordium are competitive but also fairly reward validators.

Temporary Fee Reduction

The technical changes outlined above will take several months to implement. In the meantime, the governance committee has decided to temporarily reduce the euro-per-energy parameter by a factor of 100. This change will take place on the 6th of February 2024.

This means that over the next months, all transactions will be 100 times cheaper. Then, when the technical changes to the pricing mechanism are rolled out, the transaction fees will go up again, with the guarantee that no transaction fees will be higher than today’s fees.

Simple transactions like CCD transfers are not expected to be affected much by the Wasm interpreter overhaul nor by the reevaluation of the cost of resources consumed. So the price of simpler transfers should be temporarily reduced by 100, then increased again — though the exact value cannot be estimated until we know the results of the technical overhaul. Complex transactions that involve a lot of computation will also see their fees temporarily reduced by a factor 100, but then should increase much less after the overhaul, because these transactions are targeted by the technical changes.

Read more about Concordium tokenomics here: www.concordium.com/tokenomics

Or deep dive in the recent tokenomics redesign here:
Concordium’s Tokenomics Redesign #1, October 18th 2023
Concordium’s Tokenomics Redesign #2, November 1st 2023
Concordium’s Tokenomics Redesign #3, November 8th 2023
Concordium’s Tokenomics Redesign #4, November 15th 2023