Fees pay for use of the Hedera network. Fees are incurred, for example, when hbars are transferred or data is added to the Hedera hashgraph ledger. The fees for a particular action will depend on the type of network services used (cryptocurrency, smart contracts, file service and, Hedera Consensus Service) and the degree and duration of network resources consumed in processing the transaction. The overall fee for an action on the network is called a Transaction Fee, which is composed of three distinct fees: a Node Fee, a Network Fee, and a Service Fee. Each of these fees relates to how the transaction is submitted to and validated by the network. In addition, developers offering applications on the Hedera platform may also choose to charge their users an Application Fee. Fees are denominated in U.S. dollars and paid in hbars. Although the user pays an aggregate fee, i.e., the Transaction Fee, below is additional detail on the three Transaction Fee components and the optional Application Fees:
- Node Fees. A user or application seeking to complete an action on the platform will send the corresponding transaction to a single node, which will then submit that transaction to the network. In doing so, the node will expend resources and energy (albeit a small amount). Node Fees compensate nodes for those resources and incentivize nodes to take on this critical role. Initially, the Hedera Council will set the amount of the Node Fees, but Node Fee amounts will eventually be left to each node to determine. Node fees are paid directly to the account designated by the node that submits the user’s transaction.
- Network Fees. After a transaction is submitted to the network, it is communicated to nodes that validate digital signatures, further communicate the transaction to other nodes, and temporarily store it in their memory while the network reaches consensus. The user pays a Network Fee that compensates all participating nodes for calculating consensus on the transaction. The computing resources consumed by this process can vary based on the file size of the transaction and the number of digital signatures. Network Fees are paid into a Hedera account for Network Fees and Service Fees (defined below) (such account, the “Fee Deposit Account”).
- Service Fees. Service Fees compensate the network for executing the transaction and the ongoing job of maintaining or supporting the transaction. For a file service transaction, the platform charges a Service Fee that is affected by the amount of memory needed to store a file of its size for the requested duration. For a smart contract transaction, the Service Fee is based on the processing power required by network nodes to perform the computation required by the smart contract, and the memory to store its state. Service Fees are paid into a Fee Deposit Account.
Application Fees (Optional). Developers who build applications on top of the Hedera platform may want to monetize those applications to cover costs (possibly including the cost of the Transaction Fee described above) and/or compensate themselves for the value they provide to their end users. A wallet application, for example, may choose to charge a small percentage of each deposit or withdrawal. A ridesharing application that connects drivers to passengers with no intermediary may choose to take a fee calculated as a small percentage of each ride completed and paid. Like many existing applications, some Hedera-based applications may offer both free services and paid services. Each third-party developer will determine the Application Fee it wishes to charge, if any, and these fees will be paid by end users directly to the developer.