Transaction fees are supposed to sustain blockchains long-term once token emissions decline, but the math rarely works out. Dusk currently has 8% annual inflation funding network security and development. That drops to 3% within five years. Eventually transaction fees need to cover validator costs or security degrades.
Bitcoin faces this question in a few decades when block subsidies approach zero. Will fees alone incentivize sufficient mining? Maybe, maybe not. Ethereum transitioned to proof-of-stake partly because fee revenue could plausibly cover validator costs at lower security budgets than mining requires.
Dusk needs significantly fewer validators than Ethereum for reasonable security because of the SBA consensus model. But those validators still have infrastructure costs, opportunity costs on staked capital, and operational complexity. If fee revenue doesn’t cover these costs plus expected returns, rational validators exit.
Privacy features might limit fee revenue compared to transparent chains. Confidential transactions require more computation for zero-knowledge proof generation and verification. Users might not pay premium fees for privacy if alternatives exist. The market for privacy-preserving institutional transactions hasn’t been tested at scale.
NPEX tokenizing hundreds of millions in securities sounds impressive until you calculate transaction fee revenue. Even with millions in daily trading volume, fees at a few basis points generate revenue measured in thousands daily. Supporting dozens of validators plus ongoing development on thousands daily doesn’t work mathematically.
The network needs either massive transaction volume far exceeding current projections, or significantly higher fee rates than transparent chains charge. Both face adoption challenges. High volume requires winning institutional market share from established players. High fees create incentive to use cheaper alternatives.
Token price appreciation could solve this—if tokens validators earn as rewards appreciate significantly, lower fee revenue becomes acceptable. But this makes security dependent on speculative price rather than fundamental network revenue. Unsustainable long-term.
Most blockchain projects ignore this question during early growth phases when inflation funds everything. The economics only break down years later when emissions decline and fee revenue proves insufficient. Dusk needs a clear path to economic sustainability that doesn’t depend on perpetual token price increases.
Maybe institutional adoption creates transaction volumes large enough to sustain the network on fees alone. Or maybe the model needs adjustment before inflation declines too far. Either way, the question deserves more attention than it typically receives.