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Cardano Researching ‘Stablefees’ for Cheaper Transactions

Cardano Researching ‘Stablefees’ for Cheaper Transactions
  • Cardano is currently researching the future of ‘Stablefees’ mechanism.
  • The team said Stablefees can offer fair and predictable transaction pricing.
  • The price oracle and global BEC can expand dApp’s ability in the Cardano ecosystem.

On Thursday, Cardano announced in a blog post that the team is currently researching the future of ‘Stablefees’. Furthermore, the team added that the core idea behind Stablefees to have a base price for transactions through pegging to a basket of commodities or currencies.

In the blog post, IOHK, the firm behind Cardano, stated that the purpose of Stablefees would provide fair and predictable price transactions. The team also plans to integrate Stablefees on the platform’s ledger rules and system assets approach.

Moreover, its mechanism involves a native decentralized reserve contract that oversees a stablecoin pegged to the basket named Basket Equivalent Coin (BEC). Cardano also explained that Stablefees can be considered a natural extension of Babel fees. Of note, the Babel fees are the spot conversion of BECs into ADA by the decentralized reserve.

In addition, Cardano notes that the vital part of the system is its on-chain oracle. Wherein, it determines the price of the basket in ADA. The post further elaborated that the system should also provide users the ability to find the correct price for ‘timely transaction processing’.

According to Cardano,

This approach has one advantage when compared with the first-price auction model: the pricing mechanism is continuously stabilized to a reasonable default value. Users perform price discovery in one direction only to accelerate processing if required.

However, there is a disadvantage where a prospective transaction issuer has no access to a native token. Thus, transaction issuers must pay fees in ADA.

Still, the fees are expected to adjust continuously and remain stable via the pegging mechanism with respect to the basket. Consequently, a transaction issuer can organize their off-chain asset portfolio to reach their transaction needs successfully.

Britney is a market analyst who covers stories about the cryptocurrency world. She holds a Business Administration Degree in Finance and aims to let the readers understand crypto from a beginner perspective.