ETHBerlin Zwei Spotlight: The fee-less Token-Factory on Parity Substrate
At ETHBerlin Zwei, a team of hackers took on the challenge to work on alternative fee mechanics for managing token assets on Parity Substrate. This project could be highly relevant for Dothereum research and development. This spotlight article outlines the design decisions and evaluates the potential.
“In late 2017, I was approached on Twitter via direct message by a young person from San Francisco, begging to send them a Cryptokitty. I thought, fine, I already bred a couple of dozens and asked them for their address to send it over.
When I received a physical address instead of an Ethereum one, I was a bit puzzled: should I send a letter with a printout? A private key? Should I send them a step by step guide on how to send me the correct info and redeem the cat? What about covering their transaction fees?” — Afri
As people working on blockchains are aware of, transaction fees are one of the big pain points with regards to onboarding users. Luckily, developers have been trying to solve this, and nowadays, multiple workarounds exist for Ethereum, such as dripping faucets or meta-transactions.
However, so far, these workarounds have been exclusive for Ethereum, and in an interoperable world, we need more onboarding solutions to facilitate wider blockchain adoption. Collectible assets such as Cryptokitties are a relatively easy and fun way to do so, therefore, experimenting with frameworks to allow wider onboarding, not only to Ethereum, seems very fitting.
Parity Substrate is a framework for developing the next generation of blockchains and decentralized applications. It enables developers with a high degree of flexibility for implementing the application’s underlying chains.
Ethereum has shown itself to be the ultimate platform for building token economies. Thousands of contracts have been…
The initial idea is simple: it does not matter whether we are dealing with fungible or non-fungible tokens — the user should not need to care about transaction fees for whatever they want to do with their assets.
Practically, three different approaches were investigated:
- A token fund which contains a certain amount of the chain’s native currency that will be drained whenever a token-transfer occurs.
- A transaction fee that pays the chain’s validators not in the native currency but with the token that’s being transferred.
- A proof-of-work mechanism that prevents from extensive transaction spam.
The goal of this project is to investigate alternative fee mechanics for managing token assets.
The first two options were implemented by the team and will be explained in detail in the upcoming sections.
The (fungible) token-fees
If you build an application that relies on fungible tokens, e.g., ERC-20, such as a stable-coin, you could ease the onboarding of users, traders, and merchants by allowing for transaction fees to be paid not in the chain’s native currency but rather in the asset that’s being transferred.
The chain’s validators could accept assets as a transaction fee and prioritize the transactions based on the percentage of the available supply of the corresponding token. The advantage is that no native currency is required for applications utilizing standardized fungible-token interfaces.
A downside might be the number of different assets the validators have to deal with. Interesting follow-up projects might include research on acceptable whitelisting mechanisms for block producers or an introduction of arbitrage markets for token-based transaction fees.
The (non-fungible) token-fund
Building a non-fungible asset application, such as a rare-art platform, or a crypto-collectible game, would not allow for paying transaction fees in the asset that’s being transferred because the tokens are, … well, non-fungible.
The idea of the token fund is to allow for either application developers or community members that would like to encourage the broad adoption of an asset to provide a fund that contains a certain amount of the chain’s native currency.
Users owning NFTs are allowed to do a limited number of transactions per a defined number of blocks where the token fund subsides the transaction fees. If they exceed the allowance, they could always fall back to paying regular transaction fees.
Further research could be conducted on how to incentivize communities to keep the token fund alive, such as rewarding rare collectibles to top donors.
Read also Shawn’s in-depth post published on his blog: