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A new report: Transaction Fee Mechanism Design for the Ethereum Blockchain: An Economic Analysis of EIP-1559 http://timroughgarden.org/papers/eip1559.pdf
Top ten takeaways in a thread:
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Top ten takeaways in a thread:
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1. No transaction fee mechanism, EIP-1559 or otherwise, is likely to substantially decrease average transaction fees; persistently high transaction fees is a scalability problem, not a mechanism design problem.
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2. EIP-1559 should decrease the variance in transaction fees and the delays experienced by some users through the flexibility of variable-size blocks.
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3. EIP-1559 should improve the user experience through easy fee estimation, in the form of an “obvious optimal bid,” outside of periods of rapidly increasing demand.
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4. The short-term incentives for miners to carry out the protocol as intended are as strong under EIP-1559 as with first-price auctions.
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5. The game-theoretic impediments to double-spend attacks, censorship attacks, denial-of-service attacks, and long-term revenue-maximizing strategies such as base fee manipulation appear as strong under EIP-1559 as with first-price auctions.
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6. EIP-1559 should at least modestly decrease the rate of ETH inflation through the burning of transaction fees.
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7. The seemingly orthogonal goals of easy fee estimation and fee burning are inextricably linked through the threat of off-chain agreements.
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8. Alternative designs include paying base fee revenues forward to miners of future blocks rather than burning them; and replacing variable user-specified tips by a fixed hard-coded tip.
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9. EIP-1559’s base fee update rule is somewhat arbitrary and should be adjusted over time.
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10. Variable-size blocks enable a new (but expensive) attack vector: overwhelm the network with a sequence of maximum-size blocks.
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Conclusions:
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Funding by @d24nOrg is gratefully acknowledged.
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For helpful comments and discussions, thanks also to Maryam Bahrani @dimahledba @TimBeiko @VitalikButerin Matheus Ferreira @shemnon @jamesfickel @hasufl @gakonst Andrew Lewis-Pye @barnabemonnot @dmoroz Mitchell Stern @ATabarrok Peter Zeitz!
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