Exponential EIP-1559 parameters set to ensure predictable blockchain fees
The Economic Security of Exponential EIP-1559
Computer Science and Game TheoryCryptography and SecurityDistributed, Parallel, and Cluster Computing
Summary
Blockchains use methods to decide how much users pay to get their transactions processed, which affects how much the system earns. This paper looks at one popular fee system called EIP-1559 and finds ways to set its settings so that the blockchain guarantees a minimum fee income when usage is high. This helps to discourage too much usage that could cause problems like excessive data growth. The authors analyze two versions of this fee system, including the one Ethereum uses, and explain how to choose settings that balance security and practical tradeoffs.
What this means in practice
- •For blockchain protocol designers: Pick fee system settings that guarantee minimum revenue above certain usage thresholds, helping control blockchain resource growth.
- •For cryptocurrency platform operators: Set fee parameters to economically discourage excessive transaction volumes, aiding long-term blockchain scalability and stability.
Authors
Ben Berger, Edward W. Felten, Robin Fritsch
Abstract
We consider the problem of parameter selection for EIP-1559, a widely used gas pricing mechanism for blockchains. As opposed to previous work, we aim to achieve economic security, where the chosen parameters guarantee a lower bound on total collected gas fees whenever usage over a given time window exceeds a specified threshold. This bound can be set prohibitively high, thereby economically deterring usage above a desired level. Such guarantees are particularly relevant to long-term objectives such as limiting state growth. We apply our approach to the pure exponential version of EIP-1559 which Ethereum uses and to a variant used by Robinhood Chain and Arbitrum. To achieve economic security, we first characterize the revenue-minimizing gas-usage distribution for the exponential version and for the other variant we construct a distribution whose associated fee revenue provably approximates the minimum. Using these results, we then demonstrate how to set economically secure mechanism parameters for both variants and we discuss the associated tradeoffs.