TY - GEN

T1 - Farsighted Miners under Transaction Fee Mechanism EIP1559

AU - Hougaard, Jens Leth

AU - Pourpouneh, Mohsen

PY - 2023

Y1 - 2023

N2 - We investigate the recent fee mechanism EIP1559 of the Ethereum network. Whereas previous studies have focused on myopic miners, we here focus on strategic miners in the sense of miners being able to reason about the future blocks. We derive expressions for optimal miner behavior (in terms of setting block sizes) in the case of 2-block foresight and 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 both 2-block and 3-block foresight. In particular, the simulation study indicates that for realistic levels of hashing power, mining pools do not gain from being able to reason more than 2 blocks ahead. Moreover, even though the presence of strategic miners increase the variation in block sizes and potentially empty blocks, overall system throughput tend to increase slightly compared to myopic mining.

AB - We investigate the recent fee mechanism EIP1559 of the Ethereum network. Whereas previous studies have focused on myopic miners, we here focus on strategic miners in the sense of miners being able to reason about the future blocks. We derive expressions for optimal miner behavior (in terms of setting block sizes) in the case of 2-block foresight and 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 both 2-block and 3-block foresight. In particular, the simulation study indicates that for realistic levels of hashing power, mining pools do not gain from being able to reason more than 2 blocks ahead. Moreover, even though the presence of strategic miners increase the variation in block sizes and potentially empty blocks, overall system throughput tend to increase slightly compared to myopic mining.

U2 - 10.1109/ICBC56567.2023.10174974

DO - 10.1109/ICBC56567.2023.10174974

M3 - Article in proceedings

BT - 2023 IEEE International Conference on Blockchain and Cryptocurrency (ICBC)

T2 - 2023 IEEE International Conference on<br/>Blockchain and Cryptocurrency (ICBC)

Y2 - 1 May 2023 through 5 May 2023

ER -