Hiero | HIP-1261: A Simplified Fee Model for Hiero

Transaction fees protect the network, compensate node operators, and allocate computational and storage resources. Over time, fee configuration can become complex and difficult to reason about.

HIP-1261 introduces a simplified and transparent fee model for Hiero networks. This post outlines the motivation, structure, and technical details of the proposal.

Introduction and Background

Hiero Improvement Proposals (HIPs) define protocol-level changes and improvements. HIP-1261 focuses on restructuring how transaction and query fees are defined and calculated.

The existing fee schedule introduced complexity in configuration and implementation. This made fee behavior harder to verify and predict across nodes and tooling.

HIP-1261 standardizes fee calculation using a consistent and deterministic model.

Overview of HIP-1261

The proposal introduces a model based on:

Base fee + extras

Each transaction fee consists of three components:

Node fee – paid to the submitting node
Network fee – covers gossip, consensus, signature verifications, fee payment, and blockchain storage
Service fee – covers execution and state persistence

The total fee is the sum of these components.

Fees remain USD-denominated and are defined in tinycents, preserving precision while avoiding floating-point arithmetic.

Motivation and Goals

The proposal aims to:

Reduce configuration and implementation complexity
Improve fee predictability
Enable consistent fee verification across nodes
Allow SDKs and mirror nodes to estimate fees using the same logic as consensus nodes

A simplified structure improves transparency for developers, auditors, node operators, and governance bodies.

Implementation and Technical Details

Base Fees and Extras

Each fee component begins with a baseFee. Additional cost factors, called extras, represent measurable transaction properties such as:

Signatures
Transaction size (bytes)
Keys
Gas
Token-related operations

Each extra defines a unit cost and optional included count.

Deterministic Fee Components

Node fee

Computed uniformly for all transactions
Based on bytes and signatures

Network fee

Defined as a multiplier of the node fee
Covers consensus and storage overhead

Service fee

Defined per transaction type
Covers execution and state updates

Transaction Outcomes

The HIP defines fee behavior for different outcomes:

Unreadable transactions – a punitive fee is charged to the submitting node
Invalid transactions – the network fee is charged to the submitting node
Unhandled transactions – the payer is charged the node fee and standard network fee
Bad transactions – the payer is charged the full fee (node, network, and service)

This ensures resource usage is compensated while clearly defining responsibility for costs across transaction outcomes.

Fee Configuration and Estimation

The new fee schedule is stored as a JSON configuration in system file 0.0.113.

HIP-1261 also introduces a mirror node REST API for fee estimation. This allows tools and SDKs to compute expected fees without submitting transactions, improving developer experience and transparency.

Conclusion

HIP-1261 provides a clearer and more deterministic structure for transaction fees across Hiero networks.
By simplifying configuration and enabling consistent fee estimation, the proposal improves transparency for developers, node operators, and governance participants.