Date: March 2, 2021
Speaker: Tim Roughgarden (Columbia University)
Title: Transaction Fee Mechanism Design for the Ethereum Blockchain: An Economic Analysis of EIP-1559
Abstract:
EIP-1559 is a proposal to make several tightly coupled changes to the Ethereum blockchain’s transaction fee mechanism, including the introduction of variable-size blocks and a burned base fee that rises and falls with demand. This proposal appears likely to be adopted and deployed in late 2021, in which case it will be the biggest economic change made to a major blockchain to date.
In this talk we formalize the problem of designing a transaction fee mechanism, taking into account the many idiosyncrasies of the blockchain setting (ranging from off-chain collusion between miners and users to the ease of money-burning). We then situate the specific mechanism proposed in EIP-1559 in this framework and rigorously interrogate its game-theoretic properties. We conclude by suggesting competing designs that offer alternative sets of trade-offs and highlighting related research opportunities for the AGT community.
