Cardano’s inventor sparks controversy over IOTA: “It’s impossible to be feeless”

  • Charles Hoskinson, the creator of Cardano, calls IOTA’s feeless transaction model a “common misconception.”
  • Several members of the IOTA Foundation respond and outline the characteristics of their fee model.

Input/Output Global (IOG) CEO and Cardano’s inventor Charles Hoskinson kicked off a debate on Twitter. In an Ask me Anything (AMA) session with the community, Hoskinson claimed that IOTA‘s feeless transaction model is a “common misconception.”

Hoskinson believes that somewhere along the “value chain” someone needs to pay the cost of transactions. The Cardano inventor asserted that there is no escaping the “universal principle of cost and value” with “smart” technology. Hoskinson added:

Guys, there is network, CPU, and data capacity. These cost money – nothing is free! If you have a blockchain or you have a notion of a database, somebody has to store it. If you are issuing transactions, those transactions somewhere costs something. You, the recipient, may not pay for that, but at some point it has to be paid for (…).

A member of IOTA’s community, C4Chaos, shared the excerpt from the AMA session on the social network and objected to Hoskinson’s statements. For the user, IOTA’s fee model is part of an “engineered philosophy.” While he agreed that someone in the value chain pays to run the protocol, but the user has zero expenses. IOG’s CEO responded:

It is impossible to be Feeless. An action like a transaction bears a cost. It has to be transmitted, processed, and stored. Someone must pay those costs. Saying no fee to the producer means you are subsidizing it elsewhere either through inflation or another party.

IOTA members respond

Next, C4Chaos asked Cardano’s inventor if he paid a fee to send the Tweet. Attempting to demonstrate that the use of IOTA and Twitter have no operating costs for users, C4Chaos asserted that businesses take care of these operational expenses.

Several members of the IOTA Foundation joined the debate and responded to Hoskinson. Holger Köther, Director of Partnerships, proposed a distinction between costs in “transaction fees” and “infrastructure costs”. In that sense, IOTA would be free of the former. Köther said:

(…) of course the infrastructure operation creates costs, as everywhere else. But even for that IOTA is designed for max efficiency.

IOTA Foundation’s Hans Moog made another distinction between a “feeless” transaction model and a “free-to-use” model. Moog stated that even “sending an email” has costs and requirements for users, such as the necessary equipment. “IOTA works the same way,” Moog said. He also added:

And there are several incentives for people to grant you access to their node “for free”. A merchant that wants to receive a payment from you will most probably allow you to send the payment through his node, so the consumer doesn’t need to run a node himself.

So instead of trying to “bribe” people to run servers, IOTA aims to build a technology that is just attractive in itself. The incentive to run a node is the benefit you get from taking part in the network.

David Sønstebø, co-founder of IOTA, finished off the conversation by saying:

Feeless does not mean incentive-less.

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