Another day another major innovation for the crypto world. Yep, Prof Aggelos Kiayias has been at it again.
As an extension to Babel Fees (remember?) Aggelos explains another significant innovation that will be coming to Cardano in due course: stable fees. In a recent blog he notes:
Facilitating transactions in cryptocurrency platforms stumbles on the dual utility of the platform’s underlying asset. On the one hand, users can hold and trade it as part of their investment portfolios. On the other hand, it supplies the necessary “fuel” for processing transactions. This duality suggests that the system should have a mechanism for adjusting transaction costs, so they remain competitive and reasonable. Also, the bounded throughput of decentralized platforms per unit of time introduces another hurdle: the system should also allow the users to discover the correct price for timely transaction processing, depending on their individual needs.https://iohk.io/en/blog/posts/2021/06/10/stablefees-and-the-decentralized-reserve-system/
Before going on to explore how a stable fees mechanism can be developed by extending the Stable Coin concepts developed by IOHK and Ergo for the AgeUSD stable coin…
The core idea behind Stablefees is to have a base price for transactions through pegging to a basket of commodities or currencies. Stablefees includes a native “decentralized reserve” contract that issues and manages a stablecoin pegged to the basket. A comparison in the fiat world might be the International Monetary Fund’s SDR, (established in 1969) and valued based on a basket of five currencies….
In this system, ada will play a dual role: Reserve asset of the decentralized reserve, and reward currency for staking. It will also be the fall-back currency in extreme scenarios where the reserve contract is in a liquidity crunch.
Check it out, a complex read but worth persevering. This will be another game changer for Cardano once implemented in the coming years as the platform matures and scales.