Reduce Babylon Unbonding Fee Rate from 100 to 30 sats vByte - Parameter Change Proposal
Summary
This proposal recommends reducing the Babylon unbonding transaction fee rate from 100 to 30 sats/vByte. Based on comprehensive analysis of Bitcoin transaction data spanning April 2023 to April 2025, this change would maintain reliable transaction processing while reducing costs by 70%, making the protocol more accessible and cost-efficient for users.
Parameters Upgrade Proposal
The unbonding fee will be reduced through a parameter upgrade proposal introducing the following new version of the x/btcstaking module parameters:
{
"covenant_pks": [
"d45c70d28f169e1f0c7f4a78e2bc73497afe585b70aa897955989068f3350aaa",
"4b15848e495a3a62283daaadb3f458a00859fe48e321f0121ebabbdd6698f9fa",
"23b29f89b45f4af41588dcaf0ca572ada32872a88224f311373917f1b37d08d1",
"d3c79b99ac4d265c2f97ac11e3232c07a598b020cf56c6f055472c893c0967ae",
"8242640732773249312c47ca7bdb50ca79f15f2ecc32b9c83ceebba44fb74df7",
"e36200aaa8dce9453567bba108bdc51f7f1174b97a65e4dc4402fc5de779d41c",
"f178fcce82f95c524b53b077e6180bd2d779a9057fdff4255a0af95af918cee0",
"de13fc96ea6899acbdc5db3afaa683f62fe35b60ff6eb723dad28a11d2b12f8c",
"cbdd028cfe32c1c1f2d84bfec71e19f92df509bba7b8ad31ca6c1a134fe09204"
],
"covenant_quorum": 6,
"min_staking_value_sat": 500000,
"max_staking_value_sat": 500000000000,
"min_staking_time_blocks": 64000,
"max_staking_time_blocks": 64000,
"slashing_pk_script": "agdiYWJ5bG9u",
"min_slashing_tx_fee_sat": 100000,
"slashing_rate": "0.001",
"unbonding_time_blocks": 1008,
"unbonding_fee_sat": 9600,
"min_commission_rate": "0.03",
"delegation_creation_base_gas_fee": 1095000,
"allow_list_expiration_height": 139920,
"btc_activation_height": 893362
}
This will be the fifth version of the staking parameters, following the three sets used in Phase-1 and the unused parameters introduced at Babylon Genesis (as staking registrations have not yet been enabled).
The only difference between the fourth and fifth versions are a reduced unbonding_fee_sat and a new btc_activation_height. The activation height was selected based on estimated Bitcoin block times to align with Monday, 21 July at 7am UTC.
Important Clarification: This parameter change will only affect new Phase-2 stakes. Existing Phase-1 CAP-1, CAP-2, and CAP-3 stakes will continue to use their original unbonding fee rates as established when they were created. This ensures that the economic parameters for existing stakes remain consistent with their initial conditions.
Dataset and Methodology
Our analysis examined a robust dataset comprising:
- 106,816 Bitcoin blocks (2023-04-14 to 2025-04-14)
- Filtered to focus on blocks with 100+ transactions (to exclude block anomalies)
- Using the 10th percentile fee rate from each block as our inclusion metric
- Multiple statistical approaches including rolling window analysis, CDF modeling, and worst-case wait time calculations
The 10th percentile fee rate represents a conservative threshold for transaction inclusion while avoiding distortions from private mempools and off-chain agreements. This metric provides a reliable indicator of the minimum fee needed for transaction inclusion in standard blocks.
Key Findings
Network Fee Distribution
- Median inclusion fee rate: 9.03 sat/vByte
- Mean inclusion fee rate: 25.29 sat/vByte
- Standard deviation: 55.88 sat/vByte
- Network conditions: Fees operate below 30 sat/vByte approximately 80% of the time!
The substantial difference between median and mean indicates a right-skewed distribution where occasional high-fee periods inflate the average. This suggests that most transactions confirm at significantly lower rates than our current 100 sat/vByte setting.
Confirmation Probability Analysis
For a 48-hour confirmation window (≈ 288 blocks):
| Probability | Required Fee Rate (sat/vByte) |
|---|---|
| 50% | 8.02 |
| 75% | 22.00 |
| 90% | 50.15 |
| 95% | 91.06 |
| 99% | 201.00 |
This analysis shows the fee rates required for different probability thresholds within a 48-hour window. A 30 sat/vByte fee rate would provide approximately 80-85% probability of confirmation within 48 hours, based on interpolation between the 75% and 90% thresholds.
Critical Threshold at 30 sat/vByte
The data reveals a significant inflection point at 30 sat/vByte where worst-case wait times drop dramatically:
| Fee Rate (sat/vByte) | Longest Wait (days) | Time Above This Rate (%) |
|---|---|---|
| 10 | 113.1 | 47.6 |
| 20 | 96.1 | 29.6 |
| 30 | 7.7 | 20.0 |
| 40 | 4.8 | 14.6 |
| 50 | 4.7 | 11.4 |
| 100 (current) | 2.9 | 5.1 |
The maximum wait time decreases from 96.1 days at 20 sat/vByte to just 7.7 days at 30 sat/vByte - a 92% reduction. This represents an optimal threshold where additional fee increases yield diminishing returns in confirmation reliability.
Rationale and Impact
The 30 sat/vByte rate offers an optimal balance between cost and reliability:
- Cost Reduction: 70% lower fees compared to current 100 sat/vByte rate
- Confirmation Probability: ~80-85% likelihood of inclusion within 48 hours
- Efficiency Threshold: Dramatic improvement in worst-case wait times (96.1 → 7.7 days)
- Network Compatibility: Operates above required network fee 80% of the time
The primary trade-offs are a slightly lower confirmation probability (80-85% vs. 95-97%) and longer maximum wait times during rare congestion periods (7.7 days vs. 2.9 days). For non-time-critical unbonding operations, these represent acceptable compromises given the significant cost savings and the infrequency of high-congestion events (< 20% of time).
Security Implications
This parameter change maintains the security properties of the protocol for several reasons:
-
Slashability During Unbonding: Stakers remain slashable throughout the unbonding period, even if their unbonding transaction is in the mempool.
-
Effective CPFP Mechanism: If an unbonding transaction becomes stuck due to congestion, the protocol’s Child-Pays-For-Parent (CPFP) mechanism ensures slashing can still be enforced. Calculations show that the effective fee rate of the combined transaction packet would be approximately 156 sat/vByte (5x higher than the unbonding rate), ensuring the slashing mechanism remains effective even in high-congestion periods.
-
Sufficient Time Buffer: The 7-day unbonding period provides adequate buffer for transaction confirmation even in worst-case scenarios (maximum observed wait time of 7.7 days at 30 sat/vByte).
While lowering the fee rate slightly reduces the slashing transaction fee margin, the high effective fee rate of the combined transaction packet and the extended unbonding period maintain robust protection against mempool congestion.
Conclusion
Based on comprehensive analysis of Bitcoin fee dynamics over a 2-year period, reducing the unbonding fee rate from 100 to 30 sat/vByte represents an optimal balance between cost and confirmation reliability. This change would significantly reduce transaction costs for users while maintaining reasonable confirmation times for the vast majority of network conditions.
The data strongly supports that 30 sat/vByte represents a strategic inflection point in the fee landscape, where wait times drop dramatically while still providing approximately 80-85% probability of confirmation within 48 hours.
