Babel Fees via Limited Liabilities
Manuel M. T. Chakravarty, Nikos Karayannidis, Aggelos Kiayias, and Michael Peyton Jones, Polina Vinogradova

TL;DR
This paper introduces a mechanism called Babel Fees that allows transaction fees on Ethereum to be paid using custom ERC-20 currencies instead of Ether, enabling more flexible and efficient handling of transaction costs.
Contribution
It proposes formal ledger rules and a novel fee payment mechanism that supports paying transaction fees in custom currencies, enhancing Ethereum's flexibility.
Findings
Formal ledger rules for liabilities and Babel Fees
A solution for clients to determine fee payments
An optimization approach for block producers to maximize profits
Abstract
Custom currencies (ERC-20) on Ethereum are wildly popular, but they are second class to the primary currency Ether. Custom currencies are more complex and more expensive to handle than the primary currency as their accounting is not natively performed by the underlying ledger, but instead in user-defined contract code. Furthermore, and quite importantly, transaction fees can only be paid in Ether. In this paper, we focus on being able to pay transaction fees in custom currencies. We achieve this by way of a mechanism permitting short term liabilities to pay transaction fees in conjunction with offers of custom currencies to compensate for those liabilities. This enables block producers to accept custom currencies in exchange for settling liabilities of transactions that they process. We present formal ledger rules to handle liabilities together with the concept of babel fees to pay…
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Taxonomy
TopicsAuction Theory and Applications · Digital Platforms and Economics
