Data & charts updated every hour - Get 10 seconds
Fee ratio multiple (FRM) is equal to: Miner Revenue [Block reward + Transaction fees] / Transaction fees. FRM is explicitly about security, which should be considered the foundational layer of the chain stack. By looking at FRM we can deduce how secure chains will be once block rewards disappear. More on this topic read here.
Chart |
The Fee Ratio Multiple is an alternative metric of network success (as opposed to network market cap). To take Bitcoin as an example, the idea behind the Fee Ratio Multiple is to determine what percent of the economic activity on the network would need to be paid in fees in order to maintain the same current network security if the block subsidy disappeared completely.
The Fee Ratio percentage is equal to the miner revenue in dollars divided by total transaction volume.
For a (VERY) simplified example, if miner revenue is $100 and total transaction value is $1,000, then the fee ratio is 10%. Now we need to calculate the multiple. The Fee Ratio Multiple is equal to the entire miner revenue (both transaction fees and block reward added together) divided by just the transaction fees.
So for instance, if the block reward for this era is 6.25 BTC per block and the fees are 0.5 BTC per block, then the FRM is 13.52 FRM can only be applied on a block reward eras (four year periods, like 2012–2016 and then 2016–2020). That’s because the subsidy changes every four years, so we need to keep the metric constant to account for that until a new era begins.
Because the block reward in Bitcoin halves approximately every four years, the network will increasingly rely on transaction fees to cover the cost of securing the network. The Fee Ratio Multiple tells you exactly how much that would cost you today and is therefore a better metric for network health than misleading market cap metrics.
