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Systematization of knowledge: mechanism design and the Ethereum blockchain transaction fee market

In: The Elgar Companion to Decentralized Finance, Digital Assets, and Blockchain Technologies

Author

Listed:
  • Fernando Molina
  • Pablo Roccatagliata

Abstract

The implementation of EIP-1559 changed Ethereum’s transaction fee mechanism, including variable-size blocks and a burned base fee that rises and falls with demand. The goal of this paper is to forecast the tip component of the gas price within the new incentive model applied after EIP-1559. An easy estimation of gas price was a design goal in 1559, as it is crucial for the UX experience of users of the Ethereum network. The dataset will include a mix of the most important features and metrics like TVL, market sentiment, NFT aggregated data, and block and transaction information not only for Ethereum but also for potential substitute networks. Our models forecast the non-deterministic part of the gas price (tips), in particular the minimum tip so that a transaction will be included in a block over the next hour with a probability above 90 percent. The observed MAEP for the selected models is below 5 percent.

Suggested Citation

  • Fernando Molina & Pablo Roccatagliata, 2024. "Systematization of knowledge: mechanism design and the Ethereum blockchain transaction fee market," Chapters, in: Henrik Cronqvist & Desiree-Jessica Pely (ed.), The Elgar Companion to Decentralized Finance, Digital Assets, and Blockchain Technologies, chapter 11, pages 217-240, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:22115_11
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    File URL: https://www.elgaronline.com/doi/10.4337/9781035307760.00016
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