A Treatment of EIP-1559: Enhancing Transaction Fee Mechanism through Nth-Price Auction

TL;DR

This paper introduces BNP, a new transaction fee mechanism for blockchains that combines burning and N-price auction principles to ensure incentive compatibility and contract proofness even during high congestion.

Contribution

The paper proposes BNP, a novel fee mechanism that satisfies key incentive and security properties simultaneously and is adaptable to various blockchain consensus types.

Findings

BNP satisfies UIC, MIC, and c-SCP under high congestion.

The mechanism is effective across different blockchain consensus protocols.

Experimental results confirm theoretical guarantees.

Abstract

With the widespread adoption of blockchain technology, the transaction fee mechanism (TFM) in blockchain systems has become a prominent research topic. An ideal TFM should satisfy user incentive compatibility (UIC), miner incentive compatibility (MIC), and miner-user side contract proofness ($c$-SCP). However, state-of-the-art works either fail to meet these three properties simultaneously or only satisfy them under certain conditions. In this paper, we propose a burning $N$-price auction TFM named BNP. This mechanism divides the transaction fee into a base fee, which is burned, and a priority fee, which is allocated to miners. Theoretical proofs and experimental analyses demonstrate that, even under conditions of significant transaction congestion, this mechanism satisfies UIC, MIC, and $c$-SCP simultaneously. Furthermore, the BNP mechanism is not constrained by the type of blockchain consensus, making it widely applicable.