Gas & Fees

Every transaction on Tezos incurs costs for its computation and used storage. Consider that every node is performing the calculation and keeps a copy of the data. That's why it is necessary to provide an incentive for node operators to run the infrastructure. This is done by charging a fee paid in the native crypto currency ꜩ. A nice side effect of this is that it encourages developers to write "lean" code.

Basics

1 ꜩ = 1 tez = 1 XTZ = 1,000,000 mutez

Burn 🔥

Whenever a transaction increases the context of the blockchain, the source address must pay a burn. The two different types of burn fee are:

  1. Allocation burn of 0.257 ꜩ or 257,000 mutez
    1. Activation of a new address happens when the first transaction is sent to it1.
    2. A smart contract is created. A new KT1 address is originated.
  2. Storage burn: the size of the smart contract increases.

Gas ⛽️

In short, gas is a measure for how long it takes a program to compute. It is a rough equivalent of computational steps required to calculate the new state. This limitation prevents programs in the form of smart contracts to run uncontrollably.

Consider the case of a smart contract that runs recursively. If there would be nothing to stop the program from running, many contracts could clog up the blockchain network. That's why a gas limit needs to be paid for every transaction. If the total gas used by the smart contract computation is less or equal the gas limit, then the transaction is processed and changes are applied to the state. However, if the total gas used is higher than the gas limit paid previously, then all changes are reverted, but the gas fee is collected by the baker. In other words, the transaction is still valid, but has no effect on the state. It is the responsibility of the sender to include enough gas for the transaction.

Calculating total fee 💵

The most reliable way to determine the total fee that has to be paid for any operation is done by running a simulation in the node. The node simulates the Michelson code execution and traces the amount of gas used for computation and how much storage was required. This value is not used as final fee limit, but another 100 extra units of gas are added as buffer. It is not a problem sending too much gas with a transaction, because the transaction initiator will receive back the surplus of gas.

Nevertheless, it is useful to understand how the fee per operation is computed. In the protocol update 004_Athens the constants were updated, but the formula has not changed:

total_cost = burn + fees + amount of tez
burn = storage_difference * MINIMAL_FEE_PER_STORAGE_BYTE_MUTEZ
fees >= MINIMAL_FEE_MUTEZ +
MINIMAL_FEE_PER_BYTE_MUTEZ * size +
MINIMAL_FEE_PER_GAS_MUTEZ * gas
in practice:
fees in mutez >= 100 +
1 * size +
0.1 * gas
tip

We can use the .estimate function of Taquito to simulate operations in the node. It reliably traces gas and storage costs that are used for the _gasLimit and _storageLimit property of the transaction object. After adding a small safety limit (gas buffer), the transaction is ready to be announced to a live network. In this way you will avoid erroneous transactions, where the computation runs out of gas before final execution.

Taquito uses the following constants2 for estimation:

const MINIMAL_FEE_MUTEZ = 100;
const MINIMAL_FEE_PER_BYTE_MUTEZ = 1;
const MINIMAL_FEE_PER_STORAGE_BYTE_MUTEZ = 1000;
const MINIMAL_FEE_PER_GAS_MUTEZ = 0.1;
const GAS_BUFFER = 100;

We can also go to the source code of the Tezos protocol for the constants (default_parameters.ml) cost_per_byte = Tez_repr.of_mutez_exn 1_000L;.

Below are two examples of estimating the operation costs using Taquito. We will see that there is a difference of 257,000 mutez or 0.257 tez, because of the storage burn necessary for activating an account (receiving the first transaction):

Transfer of 1 ꜩ to an inactive1 implicit account

_gasLimit : 10207 gas units
_storageLimit : 257 bytes
opSize : ~88 bytes
baseFeeMutez : 100 mutez

The total cost for this operation was after execution 1.258319 ꜩ.

Transfer of 1 ꜩ to an active implicit or originated account.

_gasLimit : 10207 gas units
_storageLimit : 0 bytes
opSize : ~88 bytes
baseFeeMutez : 100 mutez

The total cost for this operation was after execution 1.001319 ꜩ.

tip

A fee is paid to a baker, while a burn is destroyed. The latter has a deflationary quality for the total supply of ꜩ, because no account is the recipient - not even a baker.

  1. The public key for an address is revealed when a the first transaction is sent from it. This is important for other participants to verify operations signed by that public key.↩
  2. Taquito SDK estimate.ts ↩
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