Transaction fees

There are two main reasons to have transaction fees in Cardano, or any other cryptocurrency:

  1. The prevention of distributed denial of service (DDoS) attacks. In a DDoS attack, an attacker attempts to flood the network with spam transactions. If he were required to pay a sufficiently high fee for each of these fictitious transactions, this form of attack would be prohibitively expensive.
  2. Providing funds for incentives.

How transaction fees work

Each time someone wants to transfer an amount of Ada, a minimum fee is paid for that transaction. This minimum fee validates the transaction, although the sender is free to pay higher fees if they wish.

Minimum Fee

A transaction of 200 bytes in size (a fairly typical size) costs (at the time of writing):

0.155381 Ada + 0.000043946 Ada/byte × 200 bytes = 0.1641702 Ada.

The minimum fee for a transaction is calculated according to the formula: a + b × size

where:

a: is a special constant, currently is 0.155381 Ada;

b: is a special constant, currently is 0.000043946 Ada/byte;

size: is the size of the transaction in bytes.

The reason for having the parameter a is to prevent the DDoS attacks mentioned above. Even a very small dummy transaction should cost enough to hurt an attacker who is trying to generate many thousands of them.

Parameter b has been introduced to reflect the real costs: storing larger transactions requires more computer memory than storing smaller transactions, so larger transactions should be more expensive than smaller ones.

Although particular values were calculated for parameters a and b, it is likely that these values will be adjusted in the future to better reflect actual costs.

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