Dogecoin's Fee Change Promises to Reduce Costs and Incentivize Nodes, Miners

A new fee structure for Dogecoin has been designed to reduce overall transaction fees as well as incentivize node operators to relay low-fee transactions to miners.

Announced Sunday, the proposal, spearheaded by Dogecoin core developer Patrick Lodder and his team, would be implemented gradually over multiple software releases.

Introduced in 2014 and implemented in 2018, the current “meaningful fee” model was intended to prevent on-chain transaction spamming. These fees charge 1 DOGE per kilobyte of transaction data, which translates to about 2.16 DOGE (US$0.24) per average transaction.

Read more: Dogecoin’s Surging Price Has Resurrected Its Technical Development

With this year’s spike in price for dogecoin, meaningful fees can be costly. Currently, users are keeping their dogecoins on centralized platforms because transferring funds to self-hosted wallets is expensive. On the other hand, transactions with relay fees under 1 DOGE do not provide enough incentive to reach miners and are often left unconfirmed.

Many of the changes proposed cater to a freer system in which miners and nodes drive rates.

• Change minimal relay fees from 1 DOGE to .001 DOGE. At launch, node operators on the Dogecoin network will be able to set custom relay fees.
• Reduce the dust limit to .01 DOGE to incentivize the use of microtransactions. In cryptocurrency, dust refers to a fraction of a token so small, it is practically negligible. Under the current model the dust limit is too high. What last year may have been considered dust in terms of U.S. dollars is now considerably more valuable due to the spike in the price of dogecoin this year. By decreasing the dust limit, transactions between .01 DOGE and 1 DOGE can be considered full transactions and hence be relayed and accepted by miners. Node operators will be able to control this dust limit using the new “-dustLimit” parameter.
• Define a default block inclusion fee rate at .01 DOGE, up from the current fee of .00001 DOGE. This fee will incentivize miners to confirm a transaction on the soonest block available while disincentivizing spam transactions.
• Enhance relay logic to allow more transactions into the “freespace,” an apportioned section of a block where transactions with little or no relay fee can be mined free of any block inclusion fee. Due to high relay fees on small transactions, the freespace has mostly gone unused. However, transactions from the mempool will no longer be prioritized solely on transaction size.
• In a second software release, the recommended minimum fee rate will be decreased to .01 DOGE once 30% of the network begins relaying transactions with .01 DOGE/kb.

“The purpose of Dogecoin transaction fees is spam prevention,” said Dogecoin developer Ross Nicoll. “We provide suggested values so users can have confidence. If they use those values, their transactions will confirm in a reasonable time.”

He noted that while there are minimum default fees in the proposal, “of course anyone can modify their nodes to use alternative values.”

Elon Musk, followed by countless others across Twitter, r/dogecoindev, and the Dogecoin Github, have already shown their support, though there are still some questions.

Udi Wertheimer, for example, responded to the proposal on Github, suggesting the development team “should encourage a more robust and dynamic free market, which should have the effect of reducing fees based on current market conditions.”

Also, Wertheimer, a developer, noted the uncertainty concerning free transaction relay and its ability to “open the door for cheap distributed denial of service (DDoS) attacks on nodes,” to which Lodder responded with “Good point.”