Burns
When a user makes a transaction on the network, the base fee is locked on a contract on Shibarium, while the priority fee is paid to the validator. This base fee will be split into 70% burned and 30% set aside to maintain the network.
Once a certain amount of BONE (25,000) is accumulated in the burn contract, users can start the burn process from Shibarium. Once this process starts, accumulated BONE are sent to Ethereum's L1, where an automated swap for SHIB takes place, and this amount gets burned by calling its contract function. It is comparable to a withdrawal transaction, but instead of receiving tokens, they are burned and taken out of the total supply.
Users will be able to use a specific portal on Shibarium's website for this process.
Anyone can initiate these burns by just clicking "Initiate burn", and they will need to complete the process by confirming a few transactions to allow the layer migration. Once the process is complete, SHIB tokens will be directly taken out of circulation and this will be reflected in the total max. supply.
What is the difference between base fee and priority fee?
The base fee is a crucial component of transaction fees on a blockchain. It represents the minimum amount that a transaction must pay in order to be considered valid. The base fee can fluctuate with each block and is influenced by the level of congestion in the network. Specifically, if the previous block is close to being full, the base fee will increase, and vice versa.
One key feature of the base fee is that it is burned, which means it is not paid to the block producer (such as a miner or validator). This helps to prevent the base fee from becoming a profit center for those who control the network. Instead, it ensures that the fee is used solely to prioritize transactions and maintain the security of the blockchain.
On the other side, the priority fee is the amount a transaction pays to a block producer when it gets included in a block. However, the Max priority fee is the maximum amount a transaction is willing to pay, as the block producer may choose to accept less. To limit the amount paid, a Max Gas fee can be set, which is the total fee a transaction is willing to pay.
The priority fee goes to the block producer who successfully includes the transaction in a block. This incentivizes validators to include transactions with higher priority fees in their blocks, as they will earn more rewards for doing so.
Example:
Let's say the current base fee on the Shibarium network is X Bone and the priority fee for a particular transaction is set at Y Bone. When a validator includes this transaction in a block, they will receive the Y Bone priority fee as a reward for including the transaction.
However, the X Bone base fee is not paid to the validator. Instead, it is converted into SHIB and burned, which means it is removed from circulation and effectively reduces the total supply of SHIB over time. This mechanism helps to prevent inflation and ensures that miners/validators do not have an incentive to artificially increase the base fee in order to earn more rewards.
This structure may be subject to changes or adjustments in the coming months as a test environment will provide more accurate scenarios.