Can Velocity Be Modeled as a Function of the Network’s Fee Structure?

Yes, velocity can be inversely related to the fee structure. If transaction fees are high, users may seek alternative, cheaper networks, reducing the transaction volume and thus the velocity of the native token.

Conversely, if fees are paid in the native token and are moderate, it encourages use and increases velocity. A fee-burn mechanism, however, can decrease the effective circulating supply, potentially counteracting the velocity increase.

The optimal fee structure balances usage incentive with value accrual.