Mediation Fees

What are Mediation Fees?

Raiden lets users pay anyone in the network by using a path of connected payment channels to mediate the payment. Mediating nodes, which are the nodes between the initiator and target on the selected payment path, can earn mediation fees.

Mediation fees are paid by the initiator by slightly increasing the amount of tokens above the amount intended for the target. This also means that mediation fees are always paid in tokens of the kind that is being transferred.

Benefits of Mediation Fees

Mediation fees increase the health of the payment network by:

  • incentivizing users to run mediating nodes

  • choosing lower fees for routes that balance the involved payment channels

A healthy payment network allows cheap and reliable payments for users. So even though users have to pay mediation fees when initiating payments, these fees are ultimately to their own benefit.

Calculation of Mediation Fees

Each mediator can choose a fee schedule for mediating payments. This fee schedule consists of three parts:

  • a flat fee per mediation

  • a fee proportional to the mediated amount of tokens

  • an imbalance fee that increases when the payment exhausts channel capacity, which might prevent the channel from being used in future payments

The sum of these fee components represents the fee for a single mediator. Summing the fees for all mediators in the payment route yields the total amount of mediation fees for a payment.

Since the fees can change between the time of fee calculation by the initiator (or the pathfinding service on his behalf) and the time of mediation, a safety margin is added on top of the mediation fee. Without this, a mediator might drop the payment because its imbalance fee has increased due to another payment taking place within this time span.

For more details on the calculation of fees, see the blog post and the architecture decision record.

Default Fee Schedule

You don't need to configure the fee schedule yourself if you don't want to, since Raiden comes with a default fee schedule. The default values are

  • flat fee

    • DAI: 10^-6 DAI

    • W-ETH: 10^-8 W-ETH

  • proportional: 0.4% of the mediated tokens

  • imbalance: up to 0.3% of the mediated tokens (usually much less)

and apply to all transferred tokens, unless specified differently by the user.

Changing Your Fee Schedule

As with all Raiden settings, you can get a short summary of the available options by running raiden --help:

$ raiden --help
...
Mediation Fee Options:
--flat-fee <ADDRESS INTEGER RANGE>...
Sets the flat fee required for every mediation in wei of the mediated token
for a certain token address. Must be bigger or equal to 0.
--proportional-fee <ADDRESS INTEGER RANGE>...
Mediation fee as ratio of mediated amount in parts-per-million (10^-6) for a
certain token address. Must be in [0, 1000000].
--proportional-imbalance-fee <ADDRESS INTEGER RANGE>...
Set the worst-case imbalance fee relative to the channels capacity in
parts-per-million (10^-6) for a certain token address. Must be in [0, 50000].
--cap-mediation-fees / --no-cap-mediation-fees
Cap the mediation fees to never get negative. [default: True]

The first three parameters each set one of the three fee components. Each parameter takes two values: a token address and a fee value. When mediating a payment for the given token, the corresponding fee value will be used. Here are some examples of fee parameters that could be used for the DAI token:

--flat-fee 0x6B175474E89094C44Da98b954EedeAC495271d0F 1000000000000000

Ask for 1000000000000000/10^18 = 0.001 DAI per mediation

--proportional-fee 0x6B175474E89094C44Da98b954EedeAC495271d0F 1000

Ask for 1000/10^6 = 0.1% of the mediated tokens

--proportional-imbalance-fee 0x6B175474E89094C44Da98b954EedeAC495271d0F 10000

Apply up to 10000/10^6 = 1% of the mediated tokens as imbalance fee. This fee will be positive when increasing imbalance and negative when decreasing imbalance. It will usually stay far below this maximum value, because the maximum applies only when the channel goes from perfectly balanced to completely imbalanced due to a single payment.

Since imbalance fees can be negative to incentivize payments that balance your channels, the sum of all three mediation fee components could go negative, too. This can make sense, but it is counter-intuitive for the mediating user and it might open up certain classes of attacks against mediators. For these reasons, the total mediation fee per mediator is capped to not go below zero by default. If you want to allow the fee total to be negative, use the --no-cap-mediation-fees flag.

Frequently Asked Questions

Why Does the Target Receive More Tokens Than Expected?

As noted in the "Calculation of Mediation Fees" section above, a small safety margin is added on top of the mediation fees when initiating a payment. This safety margin is only used by the mediators when the channel balances change to the initiator's disadvantage immediately before initiating the payment. So usually this margin is not or only partially used up before reaching the payment target. The remainder reaches the target along with the intended payment amount itself, thereby slightly increasing the amount received by the target.

What does "Payment exceeded the maximum fee limit" mean?

Currently the Raiden client cancels payments that would require more than 20% of the transferred amount in fee costs. This is the maximum fee limit. As noted in "Default Fee Schedule", there are fees for both the DAI and W-ETH token networks by default.

This means that the transferred amount has to be big enough, so that the fees do not surpass 20% of the transferred amount. This results in the following minimum amounts for the token networks when mediation is used:

  • DAI: Min. 0.00001 DAI (10^-5)

  • W-ETH: Min 0.0000001 W-ETH (10^-7)

As direct payments do not need mediation fees, this does not apply for direct transfers.