Farsighted Miners under Transaction Fee Mechanism EIP1559
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Farsighted Miners under Transaction Fee Mechanism EIP1559. / Hougaard, Jens Leth; Pourpouneh, Mohsen.
Department of Food and Resource Economics, University of Copenhagen, 2022.Research output: Working paper › Research
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TY - UNPB
T1 - Farsighted Miners under Transaction Fee Mechanism EIP1559
AU - Hougaard, Jens Leth
AU - Pourpouneh, Mohsen
PY - 2022
Y1 - 2022
N2 - We investigate the recent fee mechanism EIP1559 of the Ethereum network. Whereas previous studies have focused on myopic miners, we here focus on rational miners in the sense of having level-k foresight. We derive expressions for optimal miner behavior (in terms of setting block sizes) in the case of level-2 foresight for varying degrees of hashing power. Results indicate that a sufficiently large mining pool will have enough hashing power to gain by strategic foresight. We further use a simulation study to examine the impact of foresight for levels k > 2. In particular, the simulation study indicates that for realistic levels of hashing power greater than 10% miners/pools can not gain from the foresight of levels k > 2.
AB - We investigate the recent fee mechanism EIP1559 of the Ethereum network. Whereas previous studies have focused on myopic miners, we here focus on rational miners in the sense of having level-k foresight. We derive expressions for optimal miner behavior (in terms of setting block sizes) in the case of level-2 foresight for varying degrees of hashing power. Results indicate that a sufficiently large mining pool will have enough hashing power to gain by strategic foresight. We further use a simulation study to examine the impact of foresight for levels k > 2. In particular, the simulation study indicates that for realistic levels of hashing power greater than 10% miners/pools can not gain from the foresight of levels k > 2.
M3 - Working paper
T3 - IFRO Working Paper
BT - Farsighted Miners under Transaction Fee Mechanism EIP1559
PB - Department of Food and Resource Economics, University of Copenhagen
ER -
ID: 315264912