Galaxy Era: Agent-based Simulation of Execution Tickets

TL;DR

This paper introduces a theoretical framework and agent-based simulation to evaluate Execution Ticket mechanisms in Ethereum, aiming to optimize decentralization, MEV capture, and incentive compatibility.

Contribution

It provides a novel framework for mechanism design in Ethereum's block space and implements a simulation to analyze trade-offs among different configurations.

Findings

Auction formats, especially second-price, effectively capture MEV.

Secondary markets can reduce centralization risks.

Non-expiring tickets help mitigate valuation risks.

Abstract

Execution Tickets are currently discussed as a next evolutionary step in Ethereum's block space allocation mechanism, separating consensus rewards from execution rewards and selling execution rights through a dedicated market. We present a theoretical framework identifying three core objectives for this mechanism - Decentralization, MEV capture, and Block Producer Incentive Compatibility - alongside practical metrics for evaluating each objective. To meet these goals, we explore seven key design parameters: ticket quantity, expiry, refundability, resalability, enhanced lookahead, pricing mechanism, and target ticket amount. We then evaluate four pricing mechanisms and construct six concrete mechanism designs from these parameters. To assess trade-offs in real-world conditions, we perform an agent-based simulation with over 300 runs. Our findings suggest that auction-driven formats, particularly second-price, excel in capturing significant MEV. The simulation also indicates that offering a secondary market can help alleviate centralization, since specialized ticket holders can enter and exit the market as needed. Non-expiring tickets show promise in reducing valuation risks, as ticket holders are not influenced by expiry-related discounting. Likewise, removing refundability simplifies the mechanism without notably impairing performance. Extended lookahead periods benefit price predictability and smoothness at a slight cost to price accuracy. Overall, this study provides a theoretical framework on the mechanism design space for Execution Tickets as well as a practical implementation of an agent-based simulation to test mechanism design choices. Further, it provides an exploratory evaluation of Execution Ticket mechanism designs, offering insights into optimal configurations that balance MEV capture, decentralization, and operational efficiency in Ethereum's block space allocation.