Merge pull request #915 from ShieldedLabs/zip-235-nsm-tx-fees

[ZIP 235] Burn 60% Transaction Fees

zips/zip-0235.md

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+```
+ZIP: 235
+Title: Burn 60% of Transaction Fees
+Owners: Jason McGee <[email protected]>
+        Zooko Wilcox <[email protected]>
+        Tomek Piotrowski <[email protected]>
+        Mariusz Pilarek <[email protected]>
+        Paul Dann <[email protected]>
+Original-Authors: Nathan Wilcox
+Credits:
+Status: Draft
+Category: Ecosystem
+Created: 2023-09-21
+License: BSD-2-Clause
+```
+
+# Terminology
+
+The key words “MUST”, “SHOULD”, “SHOULD NOT”, “MAY”, “RECOMMENDED”, “OPTIONAL”,
+and “REQUIRED” in this document are to be interpreted as described in RFC 2119.
+[1]
+
+The term “network upgrade” in this document is to be interpreted as described in
+ZIP 200. [2]
+
+"Block Subsidy” - the algorithmic issuance of ZEC on block creation. Part of the
+consensus rules. Split between the miner and the Dev Fund. Also known as Block
+Reward.
+
+"Issuance" - The method by which ZEC becomes available for circulation on the
+network.
+
+“We” - the ZIP authors, owners listed in the above front matter
+
+# Abstract
+
+We propose to burn 60% of transaction fees, while the remaining 40% be directed
+as before, providing a deflationary effect, and building the groundwork for
+long-term support of the Zcash network via the new block subsidy rules proposed
+by ZIP-234.
+
+# Motivation
+
+ZIP-233 ("Network Sustainability Mechanism: Burning") describes a method by
+which ZEC can be burned to support network sustainability.
+
+By introducing a requirement that a certain proportion of transaction fees be
+burned, we ensure that ZEC will be removed from circulating supply to contribute
+to the long-term sustainability of the network as described below:
+
+## Benefits to the Network
+
+1. **Network Sustainability**: This mechanism involves temporarily reducing the
+   supply of ZEC, similar to asset burning in Ethereum’s EIP-1559, but with
+   long-term sustainability benefits, as the burned funds effectively boost
+   future mining rewards, making it an attractive option for current and future
+   Zcash users.
+2. **Incentivizing Transaction Inclusion**: By maintaining a 40% share of
+   transaction fees for miners, we continue incentivizing miners to prioritize
+   including transactions in their blocks. This helps ensure the continued
+   efficient processing of transactions and supports a robust and responsive
+   network.
+3. **Aligning Interests:** Burning transaction fees aligns the interests
+   of miners with the long-term health of the network, incentivizing them
+   to prioritize security and efficiency. As miners focus on maintaining a
+   robust network, overall adoption and usage can increase, leading to higher
+   transaction volumes in the long run. This structure discourages short-term
+   profit-seeking behaviors, as miners benefit more from a stable and thriving
+   ecosystem than from engaging in malicious activities that could undermine the
+   network's reputation and security.
+4. **Future-Proofing the Network**: Burning a portion of transaction fees
+   is a forward-looking approach that prepares the Zcash network for future
+   challenges and opportunities. It establishes a financial buffer that can be
+   instrumental in addressing unforeseen issues and seizing strategic advantages
+   as the Zcash ecosystem evolves.
+
+# Requirements
+
+* For each block, at least 60% (rounded down) of the total fees are to be
+burned.
+* No restrictions are placed on the destination of the remaining proportion of
+fees.
+* Any fractions are rounded in favor of the miner.
+
+# Specification
+
+## Consensus Rule Changes
+
+For a given block, the coinbase transaction MUST have a `burnAmount` that is
+greater than or equal to `floor(transactionFees * 6 / 10)`.
+
+Previous transaction versions are not supported for coinbase transactions, due
+to there being no explicit mechanism to burn the required funds.
+
+# Deployment
+
+The implementation of this ZIP MUST be deployed at the same time or after
+ZIP-233 ("NSM: Burning"), and ZIP-234 ("NSM: Issuance Smoothing").
+
+# Rationale
+
+We believe the proposed changes to be relatively low-impact in terms of
+implementation and protocol changes. Additionally, transaction fees are
+currently small enough that the reduction in miner fees is unlikely to be a
+concern.
+
+## Estimated impact on miners
+
+Over 100,000 blocks starting at block 2235515, there were 316130 transactions.
+60608 of them are categorized as 'sandblasting' transactions. The remaining
+transactions have an average of 5.46 logical actions (see ZIP-317 [4]).
+
+The total fees paid to miners from those transactions, assuming the ZIP-317
+regime, would be 87.86 ZEC. 100,000 blocks is approximately 3 months of blocks.
+Extrapolating to a year, we would expect 351.44 ZEC in fees paid to miners over
+a year.
+
+If 60% of these fees burned, that would be 210.864 ZEC per year. [5]
+
+## Considerations for the Future
+
+If transaction fees were to increase, further modifications can easily be
+proposed to alter the 60%/40% split. Finding the optimal fee split may require
+an iterative approach involving adjustments based on real-world data and network
+dynamics.
+
+Looking further into the future, there may come a time when the transaction fees
+become greater than the block subsidy issuance. At that time we may need to
+reconsider the 60/40 split. However, this will likely not be the case for the
+next 8-10 years due to forecasts based on issuance models and network traffic.
+
+Further ZIPs may be proposed to burn ZEC in various ways to support network
+sustainability, including but not limited to:
+
+- ZSA fees
+- Fees and donations specific to decentralized applications
+- “Storage fees” for any future data availability
+- Cross-chain bridge usage / Cross-chain messaging
+- Note sorting micro-transactional fees
+
+# References
+
+[1] RFC-2119: https://datatracker.ietf.org/doc/html/rfc2119
+
+[2] ZIP 200: [Network Upgrade Mechanism](zip-0200.rst)
+
+[3] ZIP 233: [Establish the Zcash Sustainability Fund on the Protocol Level](zip-0233.md)
+
+[4] ZIP 317: [Proportional Transfer Fee Mechanism](zip-0317.rst)
+
+[5] https://github.com/eigerco/zsf-fee-estimator