Namada should accept non-native gas fee tokens

Mainnet Ops
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Namada isn’t limited to using NAM to pay for transaction gas fees–we can use governance proposals to enable our validators to accept arbitrary tokens to pay the gas fees. Personally, I think we should do this, ideally for as many tokens as possible.

Primary reason for accepting non-native fee tokens

It makes the user experience much better. For example, if I deposit OSMO with Namada, I can immediately use Namada without having to acquire NAM (which can frustrate the user experience). I think we need to make Namada easy and desirable to use for the immediate future, and we cannot afford to impose frictions.

Primary reason against accepting non-native fee tokens

The only reason I can see against this is that forcing the user to pay with NAM requires them to acquire NAM, increasing the demand for NAM.

Counterpoint

I imagine that people will ask: then why hold NAM? For staking. NAM stakers will capture the transaction fees and will vote to decide the future of Namada.

My counterpoint is that until Namada block space is saturated (ie. there’s competition and thus a market for processing Namada transactions), NAM fee value will be insignificant and thus won’t drive demand for NAM in a meaningful way.

Future considerations

Fees have historically been a means of preventing the chain from being spammed with useless transactions that prevent actual use. If we think fees will be a meaningful way to capture value needed to sustain the network, there are things we can do to make NAM the preferred fee token, like making it 10x cheaper to use NAM. If NAM demand is important, then perhaps there could be a way to automatically convert non-native tokens to NAM within the system, so that NAM is still the unit of account.

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fyi there’s a real-time chat about this happening here in Namada discord: Discord

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This should be generalized to all IBC assets and in a few months also IBC v2 assets like Ethereum. Basically, any IBC asset arriving in Namada can pay for gas fees in their originating IBC chain asset, Polaris is doing something similar but even more advanced pre-funding accounts, so I think we could implement a simpler version in Namada?:

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Polaris needs to pre-fund intermediary accounts to do all the routing for a complex swap, in Namada we don’t need to pre-fund, just allow to pay gas fees with token of the originating chain

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I agree with this proposal.
On the one hand, I think we should be able to propose this choice for the user, but on the other hand, the benefit of using the NAM for the user must be significantly higher.
I prefer to rephrase this sentence “like making it 10x cheaper to use NAM.” with, paying much higher transaction fees if the user does not have NAM, for example…

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i completely agree :100:

my inclination is to enable this in the same governance proposal used to increase the ibc rate limit for each asset. i just don’t know what the downstream effects are for having like 100 different fee tokens

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The phase 3 governance proposal of the dry-run will do this with mainnet OSMO, see the forum post here: Dry Run Phase 3 Gov Proposal.

I also strongly agree with the idea that the gas fees for using a non-native asset be safely configured to be more expensive than using NAM for gas fees. This helps to retain an extra economic incentive for holding and using NAM.

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