Scale or Die at Accelerate 2025: Multi-dimensional Fee Markets

Solana's quest for scalability takes a giant leap forward with the introduction of multi-dimensional fee markets, promising increased throughput and the potential to bring TradFi-like functionality on-chain.

Summary

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In a groundbreaking presentation at Accelerate 2025, Tarun Chitra of Gauntlet delved into the concept of multi-dimensional fee markets and their potential impact on Solana's performance. This innovative approach to resource pricing in blockchain networks could significantly enhance throughput and enable more sophisticated transaction types, bridging the gap between decentralized finance (DeFi) and traditional finance (TradFi).

Chitra explained that by separately pricing different blockchain resources such as execution, storage, and bandwidth, Solana could optimize its fee structure to better balance network load. This could lead to reduced fee volatility and larger confirmed blocks, ultimately increasing the network's capacity to process transactions.

However, the implementation of multi-dimensional fee markets is not without challenges. While fixing resource groups and learning optimal pricing based on demand is relatively straightforward, dynamically grouping resources proves to be a complex optimization problem. This complexity could potentially increase latency if not carefully managed.

The presentation also highlighted the potential for multi-dimensional fee markets to enable custom order types similar to those found in traditional financial markets. This could pave the way for more sophisticated trading strategies and financial instruments on the Solana blockchain, potentially attracting more TradFi participants to the ecosystem.

Key Points:

Resource Pricing in Blockchains

Resource pricing is a crucial aspect of any blockchain network, determining how much users pay for various operations such as computation, storage, and bandwidth. In permissionless systems like Solana, congestion pricing is necessary to prevent spam attacks and efficiently allocate resources.

Chitra emphasized the importance of determining how much congestion costs should increase and which resources should share congestion costs. This decision impacts the overall efficiency and fairness of the network, as well as its ability to handle different types of applications with varying resource requirements.

Benefits of Multi-dimensional Fee Markets

Multi-dimensional fee markets offer several advantages over traditional single-dimensional fee structures. By pricing different resources independently, the network can better balance load and increase throughput. This approach can lead to reduced fee volatility and larger confirmed blocks, ultimately improving the user experience and increasing the network's capacity.

Chitra presented data showing that as the number of fee dimensions increases, fee volatility decreases while block size increases. This demonstrates the potential for multi-dimensional fee markets to significantly enhance Solana's performance and scalability.

Challenges and Trade-offs

While multi-dimensional fee markets offer numerous benefits, their implementation comes with challenges. The primary difficulty lies in determining which resources should be grouped together for pricing purposes. Chitra explained that while fixing resource groups and learning optimal pricing based on demand is relatively straightforward, dynamically grouping resources is a complex optimization problem.

This complexity introduces a trade-off between increased throughput and potential latency. If the network must constantly learn and adjust resource groupings, it could lead to increased latency in low-latency use cases. Striking the right balance between flexibility and performance is crucial for the successful implementation of multi-dimensional fee markets.

Enabling Custom Order Types

One of the most exciting potential applications of multi-dimensional fee markets is the ability to enable custom order types similar to those found in traditional financial markets. By using fees to economically enforce certain transaction sequences, Solana could support sophisticated trading strategies and financial instruments previously only available in centralized markets.

Chitra gave examples such as enforcing cancel orders to be executed before other orders in a block, or implementing bond market-specific order types like "workups." This functionality could attract more traditional finance participants to the Solana ecosystem and enable new forms of on-chain financial innovation.

Facts + Figures

• Multi-dimensional fee markets can increase throughput and bandwidth in a blockchain network
• Fee volatility decreases as the number of fee dimensions increases
• Confirmed block sizes tend to grow larger with multi-dimensional fee structures
• On January 20th, 2025, Solana experienced significant transaction rejections and retries due to network congestion
• There is often a large spread between median and average fees on Solana, which multi-dimensional fees aim to minimize
• Implementing custom order types through economic incentives is more feasible than requiring validator consensus on new rules
• The bond market "workup" is an example of a custom order type that could potentially be implemented on Solana using multi-dimensional fees
• Too many fee dimensions can potentially increase latency, creating a trade-off with throughput improvements

Top quotes

1. "Resource pricing and fees is a very important thing to any blockchain, right? Figuring out how much you need to pay in gas for your transaction, figuring out as an application, how much you should be expecting your users to be interacting with your app based on the fees."

2. "Permissionless systems inherently have to have congestion pricing, where there's pricing based on how much demand there is at a given time versus fixed prices."

3. "Generally speaking, you can think of the fees as doing load balancing."

4. "The blue pill, if you fix the set of resource groups... You don't actually need to choose this function. You can learn it based on demand that people are expressing in a network."

5. "The red pill, however, and this is the part I think where people are thinking about this in Solana clients, is picking which groups of resources should be priced together or not."

6. "As thought of or seen, you may be submitted a transaction on January 20th to the Solana blockchain and learn this more directly. It's effectively the noisy neighbor problem of certain applications taking up most of the block space, leading to tons of rejections and retries."

7. "In general, one reason you may want multi-dimensional fees is the gap between the red line and the gray line is minimized."

8. "Another way is to sort of do it economically, by using fees to encourage the cancels to generally be ahead of time."

9. "Multi-dimensional fees can increase your throughput and bandwidth in a network. But if you have too many dimensions, you increase latency."

10. "It's just a way of enforcing order types, of making these custom order types that rely on relative ordering. And I think that seems like people really want to do that."

Questions Answered

What are multi-dimensional fee markets in blockchain?

Multi-dimensional fee markets are a pricing mechanism that separately charges for different blockchain resources such as computation, storage, and bandwidth. This approach allows for more efficient resource allocation and can lead to increased throughput and reduced fee volatility. By pricing resources independently, the network can better balance load and optimize performance for different types of applications.

How can multi-dimensional fee markets benefit Solana?

Multi-dimensional fee markets can potentially increase Solana's throughput and bandwidth while reducing fee volatility. By separately pricing different resources, the network can more efficiently allocate them, leading to larger confirmed blocks and a better overall user experience. Additionally, this approach could enable more sophisticated transaction types and custom order types, potentially attracting traditional finance participants to the Solana ecosystem.

What are the challenges in implementing multi-dimensional fee markets?

The main challenge in implementing multi-dimensional fee markets is determining which resources should be grouped together for pricing purposes. While fixing resource groups and learning optimal pricing based on demand is relatively straightforward, dynamically grouping resources is a complex optimization problem. This complexity can potentially increase latency, creating a trade-off between improved throughput and low-latency performance that needs to be carefully managed.

How could multi-dimensional fee markets enable custom order types on Solana?

Multi-dimensional fee markets could enable custom order types on Solana by using fees to economically enforce certain transaction sequences. For example, fees could be structured to encourage cancel orders to be executed before other orders in a block, mimicking the behavior of traditional financial markets. This approach could allow for the implementation of sophisticated trading strategies and financial instruments previously only available in centralized markets, potentially attracting more traditional finance participants to the Solana ecosystem.

What is the "noisy neighbor" problem in blockchain networks?

The "noisy neighbor" problem in blockchain networks occurs when certain applications or transaction types consume a disproportionate amount of network resources, leading to congestion and increased transaction rejections for other users. In the context of Solana, this was observed on January 20th, 2025, when some applications took up most of the block space, causing numerous transaction rejections and retries. Multi-dimensional fee markets aim to address this issue by more efficiently allocating resources and balancing network load.

How do multi-dimensional fee markets compare to traditional single-dimensional fee structures?

Multi-dimensional fee markets offer several advantages over traditional single-dimensional fee structures. They allow for more granular pricing of different blockchain resources, leading to better load balancing and increased throughput. Data presented by Tarun Chitra showed that as the number of fee dimensions increases, fee volatility decreases while block size increases. This approach can potentially provide a better user experience and increase the network's overall capacity compared to single-dimensional fee structures.

What is a "workup" in bond markets, and how could it be implemented on Solana?

A "workup" in bond markets is a process where the market freezes during a large bond transaction until a certain percentage of the transaction is completed. For example, if a central bank wants to sell $100 billion of treasuries, the market might freeze until 50% of that amount is sold. Implementing this on Solana using multi-dimensional fee markets could involve using fees to economically enforce the required transaction sequence, ensuring that the large transaction is processed before other trades can occur.

How might multi-dimensional fee markets impact DeFi applications on Solana?

Multi-dimensional fee markets could significantly impact DeFi applications on Solana by enabling more sophisticated transaction types and potentially reducing congestion during high-demand periods. By separately pricing different resources, DeFi applications could optimize their resource usage and potentially offer more complex financial instruments. Additionally, the ability to implement custom order types could allow DeFi protocols to more closely mimic traditional financial markets, potentially attracting more liquidity and participants to the ecosystem.