Tiered Pricing

Another research initiative by IOG scientists is the implementation of tiered pricing. In the current system, all transactions are treated the same without the possibility to alter their priority by paying higher gas fees, for example. This approach works well as long as the network throughput is comparable to transaction processing demand. However, as the network usage increases, not all the transactions might be eventually included in the blockchain. The possibility of a denial of service (DoS) attack – taking advantage of the fair transaction treatment to pass off malicious spam as legitimate transactions – requires additional measures to support network healthiness.

Tiered pricing enables steady system performance in an agile way, and is especially relevant in preventing DoS attacks. The research proposes to maintain predictability, fairness, and cost-efficiency of Cardano transactions while mitigating the issues that could arise from greater network demand. The approach puts forth a novel transaction fee mechanism, where each block is partitioned into three ‘tiers’ (based on the use case). Each tier makes up a set percentage of the maximum block size and is designed for different types of transactions – fair, balanced, and immediate. When the network is not busy, tiers default to the standard way of transaction prioritization.