2. Updated Fee Market and Burn Mechanism

Governance
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III. The Value Accrual Flywheel: Revenue Reinvestment and Fee Burning

The new economic model introduces a sophisticated, dual-pronged approach to value accrual that combines a deflationary fee-burning mechanism with a revenue reinvestment strategy.

A. Updated Fee Market and Burn Mechanism

MultiversX will implement a fee market structure inspired by proven models like that of Ethereum’s EIP-1559, which divides transaction fees into two components: a base fee and a priority fee.7

  • The base fee is a protocol-set minimum fee. It is split as follows:
  • 90% to Builders: This portion is directed to the smart contract authors, creating a direct revenue stream for developers. This establishes one of the most competitive builder incentives in the industry.
    • When one transaction calls multiple smart contracts, the VM calculates the gasUsed exactly by each of the contracts, and the fees are directed towards each of them according to the gasUsed.
  • 10% is Burned: This portion is permanently removed from circulation, introducing consistent deflationary pressure that is directly proportional to network activity.
  • Every year, the base fee structure changes, builders get 5% less, 5% more is burned. This is done for 8 consecutive years, resulting in a split of 50% to builders, 50% to burn.
  • The split of the fees will be additionally re-evaluated every year via a governance vote. Audits and reports will be created for each item to determine whether KPIs were reached or not.
  • The base fee from transactions which do not call smart contracts (asset transfers, data transfers, recording data) will be burnt completely.
  • Priority Fee: An optional fee paid by users to incentivize faster transaction inclusion. This entire fee is paid directly to the validators (specifically leader) who produce the block, rewarding them for their role in processing transactions and creating a competitive market for blockspace that directly reflects the real-time economic demand for the network’s processing power. This clearly targets more revenue for validators and more opportunities for validators to build more. With growing revenue, the validators can choose to lower the fees on the staking provider side, creating benefits for the users, to share the fees with users, or to deploy those into DeFi.
    • The shard split algorithm will take into account the accumulated priority fees per day vs the base fees per day, creating new shards only when that makes sense economically for all the actors in the network. Because of sharding priority fees are never too high, users enjoy the dApps at the lowest cost.

The scope of this structure thus creates a powerful dual-engine for value: builders are incentivized to create utility that drives transaction volume, and every single one of those transactions permanently increases the scarcity and baseline demand for EGLD. The 90% share of the fees to builders opens up a new set of applications and user experience, encouraging builders covering transactions free (through relayers) for their users. This share is meant to enable the creation of high frequency apps, activities, and bots, as the chain’s architecture provides sufficient block space. When blocks are full, validators can capture additional rewards from the priority fees.

*The capacity of the blockchain after the SuperNova upgrade is 1Billion Gas per seconds. Filling up one shard with smart contract transactions in one day costs 864 eGLD, which would yield 86.4eGLD in burns per shard, thus the cost is high enough for deter attacks. In year 8, it would be 432 eGLD burnt per day per shard.

B. Protocol Revenue Reinvestment Strategy

All revenue generated by the protocol is used to programmatically acquire and stake more EGLD. This creates a sovereign economic engine that perpetually strengthens the network’s security and capital base.

This mechanism functions as a self-reinforcing loop:

  1. Revenue Capture: The protocol treasury captures revenue from various sources (e.g., fees from protocol-owned applications, a portion of ESDT issuance fees).
  2. Acquire and Stake: Non-EGLD captured revenue (e.g., in USDC) is used to buy EGLD on the open market. This EGLD is then staked. Buyback is done programmatically via Smart Contracts, different fees are accumulated, and the only way to use those is via buying back eGLD from the open market.
  3. Liquid Staking: To maximize capital efficiency, the staked EGLD is converted into a Liquid Staking Derivative (LSD) token. This LSD represents staked EGLD, accrues staking rewards, and can be used in low-risk yield strategies to increase returns. It effectively transforms the protocol’s own treasury into its largest and most active DeFi participant, creating a perpetual, sovereign demand engine that constantly works to strengthen the EGLD market
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