Protocol modifications that accrue value to XTZ and increase network security?

Avax burns tokens in regular protocol usage. Reduces supply, increases scarcity, increases token price, increases network security. Ethereum has eip-1559 coming. I’m sure someone will just come in here and drop a witty link to an unproven thesis on supply caps, but what in the world is so wrong with even entertaining the idea that a protocol modification that burns xtz will increase network security? Tezos doesn’t exist in a bubble, it’s a competitive sector, and Tezos has dropped from a top 10 market cap project to nearly out of the top 50. Is anyone ever going to seriously address this?

Waiting for your proposal so we can vote!


Transaction fees burning is actually expropriation of validators revenues. Those fees are incentives for validators which are the entities that secures the chain, if you burn them instead “for the common good”, you will reduce incentives to run validators nodes. Speaking of network security, that can’t be good.

Fee burning is, basically, a redistribution of wealth. Those fees are supposed to be rewards for validators, not supposed to be burned for the “common good”.

Besides, TEZ already is, slightly, a deflationary coin, part of the fees that are earned by validators (bakers) are distributed to delegators via a market mechanism, the baker fee, @murbard can comment more on this.

If we want to increase deflation, we need to drastically increase the amount of transactions.


I disagree with this statement that the fee paid should be just for validators. Think of full nodes and the storage requirements. Each entry in the blockchain costs storage space and full nodes are essentially “burning” storage space, which cannot be recovered back. So having a fee burning mechanism for each transaction actually makes sense as each transaction consumes space in the blockchain. It is a common good.
1.The validator fee should actually be for priority inclusion in chain,
2. Fee burn should incentivise more community participation.
3. Token inflation to provide for security of the network.
eip-1559 is well thought out in that regard.

Transaction fees burning is actually expropriation of validators revenues.

I disagree with you. I think transaction fees are actually expropriation of sender’s money
Distributing the fee to delegators doesn’t make it a deflationary coin because it doesn’t decrease the supply at all
Besides as a baker you’re a tez holder as well and you gain from tez being more valuable
Edit. On a serious note, even if it’s technically revenue of a validator, in the open market delegators would move to those bakers who distribute the fees back to them so
tezos holders gain from the fees (-baker fee) even without burning it but burning makes tez more appealing to the outsiders and it doesn’t require paying additional taxes.
EIP1559 is not only about burning fees, base fee also helps wallets evalute fees correctly instead of guessing based on the previous transactions

How is that expropriation, if the user that is using the chain to transact is doing it voluntarily? If he does not want to pay that fee, he can go to transact to the NANO blockchain where there is no fee.

Supply decrease is not the only way to create deflation. If you buy 1% of the TEZ supply and in 1 year you end up with 1.005% share of the whole pie (thanks to fees), then there was an effective deflation:

From 1% to 1.005% ⇒ deflation. And the deflation in this example would be 0.5% a year, which is currently what bakers charging 10% fee earns yearly.

In the case of delegators “paying” a 10% baker fee to some baker, also have like a 0.015% year deflation.

Besides as a baker you’re a tez holder as well and you gain from tez being more valuable

As a baker, I would benefit from burning them “for the common good” instead of being rewarded me and all other bakers for securing the chain?

Basically, you are collectivizing the rewards of bakers, by burning them, effectively distributing the income revenue to all token holders, while this may sound like a socialist paradise, where everybody is happy, you are actually decreasing the incentives to run a validator node, unless all the validators decided to run validators nodes out of pure altruism, the bakers who do not agree with this policy will simply leave the chain for the good, and validators nodes will just decrease and centralize. The remaining ones, will be altruist bakers.

Even, if the policy was to burn half of the fees and reward the other half to bakers, it would still be a decrease of incentives to run baking nodes.

Let’s put this scenario:

A) You could earn $10,000,000 as a baker on tezos in the next 10 years, but the price of tezos would be $40, but there will be a ton of baking nodes, resulting in decentralization.

B) You could earn $1,000,000 as a baker on tezos in the next 10 years, but the price of tezos would be $60, but there will be very few baking nodes remaining, resulting in centralization.

Me, as a baker, I would choose A, but hang on…

Doesn’t market also value decentralization? For example, how do we know, that instead of $40 with the option A, because of the decentralization, it would actually be at $80 instead? Then TEZ would be even more valuable versus option B ($60) which burns the fee. I would argue that market values more decentralization than scarcity, so even by burning the fees, it would be a more valuable asset if it remains decentralized. Perhaps I was wrong to choose that $40 price in A and in reality it would be even much higher than the provided price example in option B.

So in reality it would be like this:

A) You could earn $10,000,000 as a baker on tezos in the next 10 years, but the price of tezos would be $80, but there will be a ton of baking nodes, resulting in decentralization.

There you go, socialism always fails because it does things in the name of the “common good”, that’s the whole premise of socialism. If you only we knew that the “common good” does more harm, than good. We actually would learn from mistakes made over and over again by humanity.

Cool, it may have some pro’s, but the con that I’m critiquing is the part where it burns revenue that suppose to be for miners.

That’s what I’m saying, let the market do its thing, instead of expropriating revenue from validators with a governance new policy. Delegators will go to those bakers that share the profits from transaction fees. The best way to increase deflation (for both, delegators and delagates), is to increase the volume of transactions on-chain. Not by a governmental new expropriation based policy.

I thought you were validating blocks voluntarily, you rewarded by the protocol with the freshly minted tez
Why would I go to NANO? there’s no fees on the tezos protocol, that’s just you running soft that expropriates my tez!

Why? If I just sent you this 0.005% would that be deflation? Can we just endlessly send to each other tez to create massive deflation?

Agree, not interested in the common good. We’ll do this for the profit of tez holders

It doesn’t increase deflation. The only deflationary things on tezos are the storage and allocation fees that are basically burned

So arthur is wrong.

If we send us each other tez, we have to pay fees and those fees goes to who ever baker find and verify that block, so yes, we would be creating deflation to who ever finds it and then that baker would be distributing that fee to their delegators via the market mechanism of the ‘baker fee’.

About the freshly minted tez from the block rewards, annual NET inflation is still 0. That doesn’t count as profit, they are called “rewards” but in reality, they are not profit, only fees are profit.

Hypothetically if there were no fees, let’s say, only block rewards, if you have 1% of the supply, at the end of the year you would still have 1% of the supply, same pie share, those can’t be counted as “profit”. Only fees create deflation (profit), with fees you’d have above 1% of the supply, above 1% ⇒ deflation, deflation is profit. If you burn the fees, you are redistributing the only true revenue of bakers, you are redistributing the income for the “common good”, that’s socialist measure. So you can’t count the block rewards as profit or “rewards”, when you’re still having the same share of the pie at the end of the year.

If bakers centralize it would be in the detriment of the tez holders. Market values decentralization more than reduced supply or deflation by expropriation. If you take the main revenue source of bakers, and burn it, then you reduce incentives to run a baker. Is that simple. And I’m not saying this because i’m a baker, and i have a rational self interest on this, but because is common sense.