The idea of 100% zero fees in blockchain has been around since money transfer existed. In blockchain, fees were never meant as incentives fore node operators (that's what block rewards are for). Instead, they are used to manage the blockchains permission-less and publicly accessible resources, in other words, to mitigate spam.

Every current blockchain has faced the fee problem and most have successfully navigated to a near zero (low) fee environment. Unfortunately the paradigm shift only occurs at zero and not near zero.

A 100% zero fee environment will not require users to own tokens to pay for fees when using dApps. This simple idea is why the rules change and will allow an era of mass adoption to actually occur. Zero fees will allow dApp developers to reach users in a way that was never before possible because users will have as few barriers to entry as possible.

While these paradigm shifts are rare, we often look back at the# m as obvious highlights in history. Past paradigm shifts include the inception of bitcoin itself, the creation of smart contracts, the DAO and the DEX.

The 2018 ICO and recent NFT craze are just by products of these paradigm shifts. Without the creation of the DAO, the ICO craze wouldn’t have happened. Similarly without DEX’s, the DEFI and NFT craze would not have happened.

Similarly, without Zero Fee blockchains, mass adoption can’t and won’t happen.

How can we understand this paradigm shift better? What are the tell tale signs and how can we spot them?

WHAT IS ZERO FEE?

Zero fee or “fee-less” is a misunderstood term because blockchain terminology is confusing and inconsistent, especially across all of the different platforms. For the novice user or the developer that’s new to blockchain, the most common definitions they may see are:

• free token transfers.
• free execution of smart contracts.
• free access to a platform’s features.

A successful paradigm shift occurs when you have the trifecta of all three combined with ease of use. The shift has not yet occurred, so it is safe to say that no blockchain has been able to offer all three in an accessible way.

LESSONS LEARNED FROM THE PAST

There are few blockchains that have any resemblance of true zero fees, but the one that stands above all is the STEEM blockchain which once graced the top 10 charts by market cap. STEEM was a purpose built blockchain for social blogging and offered a recognizable web 2.0-like experience.

Although it had a short period of success, it ultimately failed to capture mass adoption. Instead, it has become an important case study in the coming paradigm shift and what is necessary for a successful mass adoption scenario.

Note: STEEM continues to exist today but was forked in 2020 into the more popular HIVE blockchain. I will be using the name STEEM for historical accuracy, however if users wish to try this chain, they should refer to HIVE instead since it is significantly more developed whereas STEEM has largely remained unchanged since the fork.

CAPTURING USERS AT STEP 1

“When the users come, you must be ready.”

In the current fee system, when users want to get involved in blockchain, they must acquire the gas token. Not only is this a multi-step process, it is also complicated because it requires fiat on ramps. Everyone is well aware that curiosity can be stone walled if access takes more than 1 simple step.

STEEM was both a success and a failure at their step 1. A blockchain novice could sign up with an email address and begin using the STEEM blockchain within minutes and begin earning tokens with zero friction. This successful experience is still unique to STEEM despite its inception 6 years ago (2016) because current fee based chains force their potential users to go through a complicated step 1.

However, STEEM also failed at their step 1 because it limited how many accounts could be created on a daily basis. Because STEEM used human readable names, resources were required to create accounts and someone needed to provide those resources. Many users were frustrated with the signup process and eventually gave up. If you got an account, you were lucky or persistent.

You will always lose the vast majority of users at a poorly designed step 1 and therefore the paradigm shift requires a simple and accessible step 1. A paradigm shifting zero fee blockchain must not require users to obtain gas tokens first!

ALL USERS MUST HAVE THEIR NEEDS MET

“Once users are in the door, you must be ready to give them what they want.”

A zero fee environment will quickly bring users onto the platform and each of them will have their own wants and needs. Some will be developer-users wanting a bootstrapped userbase and others will be wanting to try dApps due to the promises of zero fees.

STEEM was both a failure and success at addressing this. After the sign up process, the user was given everything they were told they could do the moment they logged in. They could write their first post, read other user’s posts, upvote and comment with no restrictions.

This was a great success in comparison to fee based chains where a user would need to transfer their newly acquired gas tokens from their fiat onramp (CEX) to a self custodial wallet before being able to experience any dApps on chain.

While STEEM lacked smart contract functionality, developer-users were able to create off chain programs that did not require consensus to run (made possible with the STEEM API). While these programs were not true dApps, they gave users additional functionality and became an intensely popular way for users to engage with the platform as they learned how to navigate STEEM.

Any developer could write a program and they knew that every user had access to them. In fact, the success of these programs was far reaching because developers eventually learned how to monetize them and users were willing (i.e. not forced by the blockchain) to pay for them.

Ultimately, the lack of smart contracts on STEEM meant that any significant feature could not be added by developers like a general purpose smart contract platform could. The developers relied on the STEEM engineers and the DPoS witnesses to create and approve hard forks for anything beyond what could be done with the information provided by the API.

This frustrated all types users and ultimately caused many to abandon the platform out of frustration and not having their needs were not met.

When there is zero fee environment, users will come and developers must have the tools to fill their needs.

USERS ARE AN UNPREDICTABLE BUNCH

“A zero fee environment will bring users whose behaviors cannot be predicted.”

Because STEEM was a crypto social blogging website, certain features were hard coded with some base level assumption of how users would behave. These assumptions were true during the early days of STEEM but as users began to learn the social algorithm and it’s crypto specific features, they started to operate beyond what was predictable. Although users operated within the rules of the platform, developers did everything they could to maximize their experience through custom applications and users soon followed suite. Some of these programs were quite damaging to the community since they were designed for value extraction rather than value creation.

Without smart contracts, other developers were powerless to change or improve the user experience to create as much value as possible. This meant that everyone relied on the platform engineers and the DPoS witnesses to propose and approve hard forks to "upgrade" STEEM. While many of the hardforks did improve the experience, they did not always please everyone and were limited by the design of the STEEM blockchain itself.

While narrowing the use to crypto social blogging made it easier for STEEM to create a zero fee environment in 2016, we now know that the more narrow the use case becomes, the smaller the potential audience. The inability for developers to customize and improve user experience meant that the platform could not address the needs of different types of users.

The lesson learned from this was that you cannot predict how users will behave and you cannot rely on hardforks to improve the user experience. Instead, you must give developers the greatest flexibility to address the needs of their specific audience.

FINAL THOUGHTS

The team behind the STEEM blockchain worked tirelessly to add functionality but time was ultimately not on their side. Steemit Inc was eventually sold to the Tron Foundation and the entire engineering team left shortly after the sale.

taking all of their engineering knowledge and zero fee experience with them.

While STEEM ultimately failed to bring on mass adoption despite being a zero fee blockchain, the lessons learned from its explosive growth and accessibility became the starting point for the engineering team's next project.

From Steemit Inc, Andrew Levine, Steve Gerbino, Michael Vandeberg, Natheniel Caldwell eventually met Ron Hamenahem and formed Koinos Group and began development on a new zero fee, general purpose smart contract blockchain specifically designed to be forklessly upgradeable, developer friendly and suited for mass adopted.

This blockchain is called Koinos and is slated to be launched later 2022.

Stay tuned for my next article for exactly how I believe Koinos’s early success will look like and what is necessary to sustain its ability to cause the next paradigm shift in blockchain.