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Re: On fees


- Indirectly rewarding node operators by limiting dilution. The
assumption is that people operating full nodes own some currency,
especially for the larger holders who need most security.

Users with the greatest incentive to operate a full node are not large
holders, but those who transact frequently and need to have a trustless
view of the ledger. Hence, burning transaction fees doesn’t reward full
node operators. Quite the opposite, they are the ones paying the fees
that are being burnt.

A secondary use of transaction fees is to provide an ordering
mechanism for transactions when capacity is limited. Users can express
the urgency, or lack thereof, of their transactions by including
larger or smaller fees. However, if fees are burnt, this mechanism
disappears as miners do not get the fees and therefore only have a
weak incentive to order. In the worst case scenario, users could be
tempted to pay miners directly to have their transactions included,
leading to a strong centralization pressure.

The common assertion that fees are also a mechanism to incentivize
miners to include transactions in blocks is dubious at best.

Once blocks are full, even if you only burn part of the fees, what makes
you think users will publish transactions with a fee greater than
MIN_FEE, instead of sending a MIN_FEE transaction to a known miner and
then splitting the rest of the fee (that would otherwise be burnt)
between them?

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