Tiered Mechanisms for Blockchain Transaction Fees
Aggelos Kiayias, Elias Koutsoupias, Philip Lazos, Giorgos Panagiotakos

TL;DR
This paper proposes a tiered transaction fee mechanism for blockchains that promotes inclusivity by accommodating diverse transaction urgencies, contrasting with current mechanisms like Ethereum's EIP-1559 which favor high-value, immediate transactions.
Contribution
It introduces a formal model and a tiered pricing mechanism that ensures more inclusive, stable, and potentially revenue-neutral transaction fee policies in blockchain systems.
Findings
EIP-1559 is not inclusive and causes price surges during congestion.
Our mechanism achieves stable, low prices for low-urgency transactions.
The proposed mechanism maintains revenue through price discrimination.
Abstract
Blockchain systems come with the promise of being inclusive for a variety of decentralized applications (DApps) that can serve different purposes and have different urgency requirements. Despite this, the transaction fee mechanisms currently deployed in popular platforms as well as previous modeling attempts for the associated mechanism design problem focus on an approach that favors increasing prices in favor of those clients who value immediate service during periods of congestion. To address this issue, we introduce a model that captures the traffic diversity of blockchain systems and a tiered pricing mechanism that is capable of implementing more inclusive transaction policies. In this model, we demonstrate formally that EIP-1559, the transaction fee mechanism currently used in Ethereum, is not inclusive and demonstrate experimentally that its prices surge horizontally during…
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Taxonomy
TopicsBlockchain Technology Applications and Security · Auction Theory and Applications · Digital Platforms and Economics
