Solana Fee Model Explained: How It Differs from Ethereum

Solana’s fee model is different from Ethereum’s, which is why most people on Crypto Twitter were confused at first. There are two categories of fees on Solana: storage fees and transaction fees.

Transaction fees are the same as what you’re used to on Ethereum, but with one major difference. On Solana, fees are native to the application/smart contract you’re interacting with. What does this mean?

On Ethereum, if an application (such as the previously popular Bored Ape land sales) takes up a lot of resources, the fees on the entire chain will rise. Even if you have never used that application, as long as you do anything on the chain, including basic transfers, your fees will increase accordingly.

On Solana, the fees for that application are isolated. So no matter how high the transaction fees are in that piece of land, you can still send a transaction to another application with a lower fee.

You can easily see this by looking at the difference between the average and median fees on the Solana platform.

Another type of fee is called rent, which is used to store data on Solana.

For example, let’s say you have a bank account with USD as the default currency. But let’s say you want to receive CAD (because you’re a moron). To receive CAD, you need to open a CAD account first, since you can’t deposit funds into a USD account. On Solana, you need to open a new token account to receive CAD. But it’s important to note that this fee is fully refundable.

So if you opened a CAD account and then converted back to USD, you can close your CAD account and receive the full fee.

The currently known shortcomings are as follows:

- Storage pricing was not modeled correctly.

-The local fee market is flawed in execution, but much better than it was before.

- The fee API for estimating predictable transaction landings is not mature enough to give definitive results.

At the time of writing, Solana’s median fee is still around $0.003 (800-2400 user TPS).

When you see a random eye-catching screenshot on Twitter, you can almost be sure it refers to:

storage fees (some exchanges will pay this for you because it’s refundable, but Coinbase doesn’t) — or it only applies to fairly competitive markets like shitcoins and doesn’t reflect the fees for regular users.