IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2012.00854.html

Transaction Fee Mechanism Design for the Ethereum Blockchain: An Economic Analysis of EIP-1559

Author

Listed:
  • Tim Roughgarden

Abstract

EIP-1559 is a proposal to make several tightly coupled additions to Ethereum's transaction fee mechanism, including variable-size blocks and a burned base fee that rises and falls with demand. This report assesses the game-theoretic strengths and weaknesses of the proposal and explores some alternative designs.

Suggested Citation

  • Tim Roughgarden, 2020. "Transaction Fee Mechanism Design for the Ethereum Blockchain: An Economic Analysis of EIP-1559," Papers 2012.00854, arXiv.org.
    • Handle: RePEc:arx:papers:2012.00854
    as

    Download full text from publisher

    File URL: https://arxiv.org/pdf/2012.00854
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Eric Budish, 2018. "The Economic Limits of Bitcoin and the Blockchain," NBER Working Papers 24717, National Bureau of Economic Research, Inc.
    2. Nicolas Houy, 2014. "The economics of Bitcoin transaction fees," Working Papers halshs-00951358, HAL.
    3. Mohammad Akbarpour & Shengwu Li, 2020. "Credible Auctions: A Trilemma," Econometrica, Econometric Society, vol. 88(2), pages 425-467, March.
    4. Matheus V. X. Ferreira & S. Matthew Weinberg, 2020. "Credible, Truthful, and Two-Round (Optimal) Auctions via Cryptographic Commitments," Papers 2004.01598, arXiv.org, revised May 2020.
    5. Coppinger, Vicki M & Smith, Vernon L & Titus, Jon A, 1980. "Incentives and Behavior in English, Dutch and Sealed-Bid Auctions," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 1-22, January.
    6. repec:cup:cbooks:9781316779309 is not listed on IDEAS
    7. Roughgarden,Tim, 2016. "Twenty Lectures on Algorithmic Game Theory," Cambridge Books, Cambridge University Press, number 9781316624791, June.
    8. Roughgarden,Tim, 2016. "Twenty Lectures on Algorithmic Game Theory," Cambridge Books, Cambridge University Press, number 9781107172661, June.
    9. Easley, David & O'Hara, Maureen & Basu, Soumya, 2019. "From mining to markets: The evolution of bitcoin transaction fees," Journal of Financial Economics, Elsevier, vol. 134(1), pages 91-109.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maryam Bahrani & Pranav Garimidi & Tim Roughgarden, 2023. "Transaction Fee Mechanism Design with Active Block Producers," Papers 2307.01686, arXiv.org, revised Oct 2023.
    2. Jason Milionis & William Pires, 2026. "On testing the incentive compatibility of single-parameter allocation mechanisms," Papers 2609.17406, arXiv.org.
    3. Tom Johnston & Michael Savery & Alex Scott & Bassel Tarbush, 2023. "Game Connectivity and Adaptive Dynamics," Papers 2309.10609, arXiv.org, revised Jun 2026.
    4. Hanna Halaburda & Guillaume Haeringer & Joshua Gans & Neil Gandal, 2022. "The Microeconomics of Cryptocurrencies," Journal of Economic Literature, American Economic Association, vol. 60(3), pages 971-1013, September.
    5. Konstantinos Georgalos & Indrajit Ray & Sonali SenGupta, 2020. "Nash versus coarse correlation," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1178-1204, December.
    6. Emerson Melo, 2025. "Learning in random utility models via online decision problems," International Journal of Economic Theory, The International Society for Economic Theory, vol. 21(4), pages 494-526, December.
    7. Tommaso Denti & Doron Ravid, 2023. "Robust Predictions in Games with Rational Inattention," Papers 2306.09964, arXiv.org.
    8. Irene Aldridge, 2026. "Evaluating AI Investment Strategies," Papers 2606.08791, arXiv.org.
    9. Tom Johnston & Michael Savery & Alex Scott & Bassel Tarbush, 2026. "Game connectivity and adaptive dynamics in many-action games," Papers 2601.05965, arXiv.org, revised Jun 2026.
    10. Peter Zimmerman, 2020. "Blockchain structure and cryptocurrency prices," Bank of England Staff Working Paper series 855, Bank of England.
    11. Emerson Melo, 2021. "Learning in Random Utility Models Via Online Decision Problems," Papers 2112.10993, arXiv.org, revised Aug 2022.
    12. Ben Amiet & Andrea Collevecchio & Marco Scarsini & Ziwen Zhong, 2021. "Pure Nash Equilibria and Best-Response Dynamics in Random Games," Mathematics of Operations Research, INFORMS, vol. 46(4), pages 1552-1572, November.
    13. Saketh Aleti & Bruce Mizrach, 2021. "Bitcoin spot and futures market microstructure," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(2), pages 194-225, February.
    14. Tim Roughgarden, 2018. "Complexity Theory, Game Theory, and Economics: The Barbados Lectures," Papers 1801.00734, arXiv.org, revised Feb 2020.
    15. Michael Sockin & Wei Xiong, 2020. "A Model of Cryptocurrencies," NBER Working Papers 26816, National Bureau of Economic Research, Inc.
    16. Paul W. Goldberg & Alexandros Hollender & Ayumi Igarashi & Pasin Manurangsi & Warut Suksompong, 2022. "Consensus Halving for Sets of Items," Mathematics of Operations Research, INFORMS, vol. 47(4), pages 3357-3379, November.
    17. Michael Sockin & Wei Xiong, 2023. "Decentralization through Tokenization," Journal of Finance, American Finance Association, vol. 78(1), pages 247-299, February.
    18. Podhorsky, Andrea, 2024. "Bursting the bitcoin bubble: Do market prices reflect fundamental bitcoin value?," International Review of Financial Analysis, Elsevier, vol. 93(C).
    19. Juan Jesús Rico-Peña & Raquel Arguedas-Sanz & Carmen López-Martín, 2025. "Transactions Market in Bitcoin: Empirical Analysis of the Demand and Supply Block Space Curves," Computational Economics, Springer;Society for Computational Economics, vol. 66(4), pages 3327-3357, October.
    20. Balzer, Benjamin & Rosato, Antonio & von Wangenheim, Jonas, 2022. "Dutch vs. first-price auctions with expectations-based loss-averse bidders," Journal of Economic Theory, Elsevier, vol. 205(C).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2012.00854. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: https://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.