Detailed research here

Motivation

• We want to target block saturation level of s* = 0.25 (adjustable). The allows the system to handle 4x transaction spikes, with room for crucial transactions, e.g. misbehavior reports.
• We introduce v a fee variability (multiplier) factor, which controls how quickly the transaction fees adjust. Where: v≤ p / (k * (1−s∗)).

Fast vs Slow fee mechanisms
There are two options to consider when it comes to the fee adjustment rate

1. Slow adjusting with tipping (recommended): Adjusts slowly, at the pace of long term tendencies, and uses tipping to deal with long queues at peak hours. V is small.

2. Fast adjusting: Adjusts the price very quickly, at the same pace as the peaks and valleys of activity.

from: @gavofyork