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Optimal Strategy in Blockchain Transaction Issuances with CIR Process

Author

Listed:
  • Bumho Son

    (Chung-Ang University)

  • Seongwan Park

    (Seoul National University)

  • Jaewook Lee

    (Seoul National University)

  • Huisu Jang

    (Soongsil University)

Abstract

This study proposes a novel transaction submission timing strategy for Ethereum aimed at minimizing transaction fees and maximizing user utility under the Ethereum Improvement Proposal (EIP)-1559 framework. Utilizing the Cox-Ingersoll-Ross (CIR) process, the research models the base fee, which fluctuates according to gas consumption in Ethereum blocks, to develop an optimal submission time for transaction issuers. Key findings reveal that the maximum priority fee is statistically independent of the base fee, allowing users to optimize their transaction timing without significant risk of higher fees. The geometric mean of gas consumption, modeled via a CIR process, effectively forecasts base fee changes, leading to measurable utility gains for transaction issuers. The study further explores the robustness of the model across various market conditions and transaction urgency levels, demonstrating that the proposed strategy yields the most substantial benefits in stable market environments and for transactions with moderate urgency. These insights contribute to improving user satisfaction and enhancing network efficiency within Ethereum’s transaction fee mechanism.

Suggested Citation

  • Bumho Son & Seongwan Park & Jaewook Lee & Huisu Jang, 2025. "Optimal Strategy in Blockchain Transaction Issuances with CIR Process," Computational Economics, Springer;Society for Computational Economics, vol. 66(5), pages 4137-4159, November.
    • Handle: RePEc:kap:compec:v:66:y:2025:i:5:d:10.1007_s10614-024-10839-3
    DOI: 10.1007/s10614-024-10839-3
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    References listed on IDEAS

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    1. Tim Roughgarden, 2020. "Transaction Fee Mechanism Design for the Ethereum Blockchain: An Economic Analysis of EIP-1559," Papers 2012.00854, arXiv.org.
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    4. Anil Donmez & Alexander Karaivanov, 2022. "Transaction fee economics in the Ethereum blockchain," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 265-292, January.
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    6. Urquhart, Andrew, 2022. "Under the hood of the Ethereum blockchain," Finance Research Letters, Elsevier, vol. 47(PA).
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