Ripple CTO David Schwartz has put forward two key proposals aimed at challenging Ethereum's fee model by improving the transaction fee management of the XRP Ledger (XRPL). Firstly, he suggests dynamically calculating the minimum fee required to process a transaction after consensus and refunding any excess fees paid, to promote fair incentives and reasonable bidding. Secondly, he proposes refunding users the difference between the fee they paid and the median fee of all accepted transactions in each ledger, reducing overpayment. Currently, XRPL's transaction fees are fixed and non-refundable, causing users to often pay excessive fees, whereas Ethereum allows refunds of unused gas fees. These proposals aim to enhance user experience and network performance and are expected to be reflected in the upcoming 2.5.0 version upgrade. Meanwhile, XRPL recently saw the launch of Circle USDC, with XRP prices rising over 5% in the past 24 hours.

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HIGHLIGHTS Key Ripple figures discuss about contrasting fee models of EVM and Hooks. David Schwartz proposes a fee management-focused upgrade for the XRPL to outdo Ethereum.  Schwartz proposed refunding excess fees based on either minimum required fees or median transaction fees. Ripple CTO David Schwartz is sparking a new wave of innovation with his proposal to upgrade the XRP Ledger's transaction fee management, setting the stage for a possible showdown with Ethereum. In response to growing concerns over XRPL's transaction fees, David Schwartz proposes two innovative solutions, promising to streamline costs and provide refunds for unused fees.

Ripple CTO Proposes Transaction Fee Upgrades for XRP Ledger
In an open discussion on the X platform, Ripple CTO David Schwartz introduced proposals on innovative transaction fee upgrades for the XRP Ledger. His thread comes amid growing discussions about overpayment on the XRP Ledger (XRPL) in comparison to the Ethereum blockchain. He stated, “I like the idea of charging every transaction in the ledger the same fee level when possible, but prioritizing transactions based on the maximum fee they were willing to pay.”

David Schwartz's Two Key Proposals
Notably, Schwartz proposed two major ideas to enhance the XRPL’s efficiency and fairness. His primary goal was to eliminate unnecessary overpayment. He noted, "Everyone overpays. That's not ideal.”
Schwartz’s first proposal centers on dynamically calculating the minimum fee needed for transaction processing after consensus. Users who overpaid would then receive a rebate for the excess amount, promoting fair incentive alignment and rewarding honest fee bidding. The Ripple CTO wrote,


One idea is to compute the fee level required to get one more transaction into the ledger after the consensus transaction set is determined and rebate any fee above that level that any transaction tried to pay. You might have to tweak that a bit to make it not break consensus.

Secondly, he proposed calculating the median fee of all accepted transactions in each ledger and refunding users the difference between their paid fee and the median fee, effectively reducing overpayment. Although this method is more practical, it may lead to overpayment if users submit their highest acceptable bid. Both proposals prioritize improving user experience while maintaining performance standards.
These discussions come amid anticipations of the blockchain's 2.5.0 version upgrade in June. The network also witnessed some developments last week, including the launch of Circle's USDC on the Ledger.

Key Takeaways from the XRPL vs Ethereum Fee Debate
Significantly, Schwartz's proposal emerged from insights into the contrasting fee models of EVM and Hooks. It is noteworthy that EVM (Ethereum Virtual Machine) and Hooks (used in XRPL) have distinct approaches to transaction fee calculation. This distinction was highlighted by XRPL Senior Software Engineer Mayukha Vadari, who stated that EVM refunds unused gas while XRPL's Hooks charges based on the worst-case scenario compute.
The XRP Ledger's current minimum transaction fee stands at 0.00001 XRP (10 drops) for standard transactions, with the possibility of temporary increases during periods of unusually high network load. Reportedly, all transaction fees are burned, including the excess amount beyond what's actually needed. While this mechanism helps reduce XRP's total supply, it also results in users often overpaying for transactions. Unlike Ethereum, which allows users to overestimate gas costs and receive refunds for unused amounts, the XRP Ledger locks in a fixed fee that doesn't offer refunds.
Explaining the idea of “overpaying” for a hook, the XRPL engineer stated,


It's not considered "overpaying" for a hook, it's considered a static fee. And adding refundability for transaction fees would also be a major shift. I'm not involved with Xahau though so not my place to say.

In response to the community’s queries and Vadari’s explanation, XRPL dUNL validator VET suggested implementing a feature to refund unused fees to transactors. He promoted a more efficient feel model, following which David Schwartz introduced his proposal.
Amid this development, the XRP price has rebounded in the last 24 hours. CoinMarketCap data shows that the altcoin is up over 5% during this period, trading at around $2.28.

Ripple CTO Proposes XRP Ledger Transaction Fee Upgrade Plan, Challenging Ethereum's Fee Model