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I understand that Monero uses high xmr/KB fees in order to prevent blockchain bloat, like what happened in the '2014 hack'. If I understand correctly though, Monero will decrease the transaction fees if the price in fiat goes up; as to pose the same high costs in terms of fiat so there can be some form of protection to prevent blocks from being bloated like crazy by malicious intent.

So how will Monero implement dynamic fees exactly, or do dynamic fees already exist? How would they work exactly in terms of continually changing and keeping up to date? Do transaction fees change every hard fork, or do they continually change according to the current price? Is/would the price be in USD, EUR, BTC, or any other currency/KB?

  • 4
    Dynamic fees don't exist yet, still under a lot of discussion. Right now the fee is hardcoded. – hyc Aug 21 '16 at 2:17
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Like hyc already said, dynamic fees currently do not exist yet and currently the minimum fee is hardcoded at 0.002 XMR per kB. There is a lot of discussion on how to address this subject and core-team member ArticMine is looking into it. However, given that there is nothing concrete yet, it is not possible currently to answer your question.

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Monero's fees are not dependent on price. They are based on the size of the transaction (minimum 0.002 Monero per kB, rounded up).

There is some research going on about making the fees dynamic, based on directly observable quantities such as transaction rate, but this isn't anything firm yet.

Monero price is inherently foreign from the blockchain, and as such it is difficult to have an automated consensus system which takes it into account. It may be vulnerable to Sybil attacks, and attackers paying miners to lie about the current exchange rate.

For at least the near future, fees are expected to be changed "manually" by the dev team, if the price of Monero stays for enough time at a level which makes transaction fees too expensive, or too cheap (yes, it's pretty subjective, and it will be that way until a non gameable automated way is worked out).

  • Is there any public discussion about the research on dynamic fees? I would love to join, since I have some ideas on it and would appreciate to hear some feedback from others. – janowitz Oct 13 '16 at 13:06
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    It's on bitcointalk.org, look for posts by ArticMine, with keywords "fee block formula" and you should find it. – user36303 Oct 13 '16 at 13:59
  • Thanks, very interesting stuff! I am now reading and trying to understand... – janowitz Oct 13 '16 at 14:21
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I don't have data to analyze this.

However, I guess average transaction amount might have relationship to monero market price, because people will spend fewer if xmr is expensive, spend more if xmr is cheap.

For example, in Bitcoin beginning stage, you might spend 500 BTC to buy a pizza, but now?

While considering transaction size, maybe we can also consider transaction amount for transaction fee change on a yearly basis. I said yearly basis, because we might have to avoid seasonal effect and spam attack.

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