Economics

Fee Structure

Blockchain Transaction Fees

Billed in $MSG tokens. There are 2 components:

• Gas: Gas is a unit that measures the amount of computational effort required to execute operations like transactions and smart contracts. Each operation has an associated gas cost, which is meant to reflect its computational complexity. When a user submits a transaction, they specify the amount of gas that they are willing to consume for that transaction (gas limit) and the price they are willing to pay per unit of gas (gas price).

• Gas Price: The gas price is the amount of the native token that the sender is willing to pay per unit of gas. It is usually specified in a subdenomination of the native token (e.g., in micro, nano, or smaller units of the token). Validators prioritize transactions with higher gas prices because including them in a block is more profitable.

The total transaction fee is calculated as follows:

Transaction Fee = Gas * Gas Price

These fees serve multiple purposes:

• They compensate validators and delegators for the computational resources expended in processing transactions and securing the network.

• They deter spam transactions by making it costly to flood the network with meaningless transactions.

• They can be used as a mechanism to tune the throughput of the network. By adjusting the gas costs of operations, the network can indirectly control the rate at which certain operations are performed.

mLayers allows for customizable fee structures through its governance mechanism.

Message Fee

Message fee refers to the cost of sending a message. This is billed in $MSG. Message fees are fixed for each billing cycle. The mLayer DAO can vote on and implement changes to the message fee for future billing cycles. A portion of the fee paid is issued as rewards to the Validator that processes the message and the validator that delivers it to the client.

Inflation

The starting inflation rate for $MSG tokens is established at 3%, providing ample rewards for initial participants. There will be an annual reduction of 10% over a span of 12 years after which the rate becomes fixed. The goal of this scheme is to reach an equilibrium between the inflation rate and the network's earnings, ensuring long-term sustainability.

Reward System

Validators are responsible for maintaining and securing the network. They will be rewarded in several ways:

• A portion of the cost of every message processed in $MSG tokens

• A portion of the cost of every message delivered in $MSG tokens

• Block rewards ($MSG) for on chain transactions

• $MSG annual inflation