Fee reduction equals harvesting income reduction?

Technical Discussion
#1

As fees are getting lower, doesn’t that have major implications for anyone harvesting? As the fees in a block are what’s being harvested, a major reduction in fees will have the same major reduction in harvesting income (denoted in xem)? That is when the number of transactions stays more or less the same off course, but at this stage of the project I wouldn’t expect a major surge in transactions because of the lower fees.

In another thread about lowering the fees (NEM Fee adjustments?), to my surprise no one is even discussing this, so it might be I misunderstood how this works.

Also, who made the final decision to reduce the fees? Is that just the development team or do users/ (super) nodes get a vote in that?

#2

I am also harvesting.

The harvesting income is 1/20 in simple calculation. And I think that the increase in transaction due to the decrease in fee will not be 20 times.
I do not know in the future.

Even so, if you can get a bit of it, people who do barbasting do not have everything, but they will remain.

If we reduce Wallet’s balance the importance will go down.
Importance will come to mean when Vote etc. is done in the future.
I have put a certain amount of money in Wallet to maintain the importance, and harvesting is just about lucky if I get a little bit of it.

And we believe that harvesting exists to prevent centralization of power.

It is an impression of a general user.

#3

Thanks for the reply.

As a relatively small investor, it doesn’t really affect me personally. But I can imagine that if you are a large investor who did his/her investment based amongst others on the expected harvesting income, you would feel quite screwed by such decisions, especially if you bought recently.

Overall I think it is quite a scary environment for such investors. From one day to another developers can just announce that your harvesting income will basicly decrease 20-fold, without having anything to say in the matter.

It could be argued that for example bitcoin miners hold too much power in voting for system upgrades, but in the case of xem harvesters I feel they might have too little. What do you think of that?

#4

Where as I appreciate your thoughts in an investigative view. Actually nobody can answer this. Imagine following.

Let’s think you get a share of 1% of the transactions (just a simple number)
And there are 100 transactions with a fee of 15XEM.

So you get 100x15=1500 and your share is 1% of it which would be 15XEM worth 0.2$ (yes i know the actual price) each equal 3$.

Your income would then be 3$

Now let’s assume the fee will be cut to 5XEM per transaction.

So people start to use xem even for small transaction. Let’s say they will double the transactions to 200 a day. Because now it’s even cheaper to transfer.

So there are 200x5= 1000 XEM in the Blocks. You still have 1%

Due to higher demand of XEM (more spending in the economy) the price rise to 0.4$ each so

1% of 1000 = 10 and 10* 0.4$ = 4$

Take in account other positive aspects:

  • gain importance is in the second economy cheaper due the lower fees
  • your vested stake gained a lot of value in fiat dependent on the higher demand

Nobody can predict the markets even if we know the formulas, we don’t know human behavior. But to me it has no clear negative effect in a first view.

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#5

I think that is a wild assumption, as in this stage people don’t really use it for payments yet. Most transactions will just be from exchange to personal wallet, and I don’t expect any significant increase in transactions because of the lower fee, since exchange fees generally already outweigh xem’s inherent fees. For the higher demand of XEM due to the lower fees I would use the same argument: fees are not a big issue yet and I think demand is not constraint by it at the moment. In fact, demand might even go lower because there is less to harvest (judging from questions on this forum a lot of people got into it because of the harvesting).

Even so, to me the reduced fees also do not have a purely negative effect. It is just that I can imagine that not everyone agrees with that, yet currently it seems that whatever developers want to change to the system will be changed, without the need of the backing of users (harvesters) in a formal way. If that will change by means of a voting system bound to importance rate, that would be great, but as I understood from mizunashi that is still a plan for the future.

In the meantime, it seems very uncertain to invest in xem as users cannot control or are uninformed about exactly what features will be implemented. And fees are a very important part of the system, whether the change turns out to be positive or negative. If that remains the way it is, there might be forking hazards if changes are implemented that users are unhappy with.

For example, imagine the extreme case that developers plan to double the amount of xem in existence, with the larger part reserved to themselves. I trust they wouldn’t, but in the theoretical case they could just implement that (even within the still hidden Catapult release), and all users would just have to deal with that or use a fork of their own. That doesn’t seem healthy to me.

#6

  1. Yes that is an assumption (like the one that it won’t double), as said nobody can predict that exactly now. Specially not the market dynamics. I just wanted to highlight, that the cut fees also could have an even bigger positive effect.

  2. When it comes to fees or cost, there is no such thing as a to small cost. Everybody tries to optimize the cost, and take all the arbitrary advantages, some are just «lazier» than others. That’s specially the case in nearly perfect markets like we see it in altcoins with a lot of substitutes. American Airlines saved 40’000$ by reducing their customers salad by one olive each :wink: seems stupid maybe, but it worked for them.

In general, I fully see your “ask your community” idea, and I totally agree with that. But here again instead of doing some complicated voting systems and process let the money speak. You mentioned the extreme example to double the existing XEMs. That would just crash the price like we see in real 3rd world economy’s (hyperinflation). And let’s imagine the hypothetical holders would like to make a lot of money out this thing, they would lose everything instead.

I’m quite new to NEM but I saw a few frustrated people who would prefer to trade making quick money versus long term stability. I just think it’s an individual choice.

To come back to your initial question. I don’t think anyone can answer your question. Still it’s important to talk about and be aware of the risks. I personally believe in a long term opportunity and that the goals for the developers, for the investors, harvesters and the NEM initiators are pointing in a stable long term direction.

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#7

You are right that we can’t predict the market (but we can try a general picture with common sense). My problem is more with the way decisions are made currently (from my limited observation so far).

I’m glad we agree at least partially about involving the community. Could you explain what you mean by ‘let the money speak’? If you mean changes will happen and then we’ll see what the price does, then I don’t agree there (that is too late, disasters cannot be prevented this way).

And you are right that developers won’t do something extreme as doubling the xem and probably crashing the price as a result (as we both mentioned it is an extreme example). But they might implement other, less radical ideas that will to some extend influence the price. And they might make mistakes, being human and all, not only with bugs but also in functional aspects. If they are the only party making such decisions then that is a very centralized aspect, while crypto currencies in general are meant to be decentralized (not only in the mining/harvesting etc. but also in decision making). Is this not the case with XEM?

BTW I’m also in it for the long term, that’s why I raise these concerns that do not apply to my current situation yet. If I were a short term speculator I wouldn’t bother with it.