Understanding transactions and fees in Terra

Transaction volume

Transaction volume is defined as the number of transactions that occur in a given time frame, like a day, a week or so. In most of the cases, the transaction volume refers to the number of transaction in a single day.

In order to carry out a transaction on terra, we need to provide some incentive to the proposer to get our transaction processed. This incentive is known as fees. The fees are further split between the respective delegators and valildators who increased the stake of the proposer. Hence, We are interested in knowing the relation between the fees and the transaction volume.

A quick info on terms

Validators - Validators are the miners of the Terra blockchain. They are responsible for securing the Terra blockchain and ensuring its accuracy. Validators run programs called full nodes which allow them to verify each transaction made on the Terra network. Validators propose blocks, vote on their validity, and add each new block to the chain in exchange for staking rewards from transaction fees.

Staking - Staking is the process of bonding Luna to a validator in exchange for staking rewards.

Delegators - Delegators are users who want to receive rewards from consensus without running a full node. Any user that stakes Luna is a delegator. Delegators stake their Luna to a validator, adding to a validator’s weight, or total stake. In return, delegators receive a portion of transaction fees as staking rewards.

Gas- Gas is a small computational fee that covers the cost of processing a transaction.

Relation between transaction volume and fees

Every Transaction on terra incurs a gas fee. Marketswaps between stable coins also include tobin tax which is usually 0.35 %. while market swaps between stable coins and luna involves spread. Spread fees are added to any market swap between Terra and Luna. The minimum spread fee is .5%.

As it can be seen that the system uses a percentage fee rather than a

It seems bizarre that the fees appears to be too high on a particular phase nov 9 - nov 20. We fail to get any relation because of this anomaly. Hence we ignore this part and plot a new graph.

Well this is better, we can clearly see that the volume and fees follow more or less same pattern, until the month of march 2022. A deeper analysis needs to be done to determine the reason. But we can conclude that both of them follow the same general trend.

Out of Curiosity let us just have a look at how the total transaction amount in a day varies with swap fees.

Well, this graph is much better, It can be clearly seen that both the fees and the total amount of USD transferred follow the same curve.

Analysing fees from astroport

Astroport is a marketplace to sell and buy crypto on the terra ecosystem. Non-native swap, that is swaps not related to stablecoins and luna are done here. The fees is calculated as the difference between the ask price and offer price.

We fail to see any correlation between the fees and volume in the astroport graph, this may indicate that either our metric for calculating fees is wrong or the fee structure on astroswap is complex.