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Base Fee Manipulation in Ethereum’s EIP-1559 Transaction Fee Mechanism

Authors Sarah Azouvi , Guy Goren , Lioba Heimbach , Alexander Hicks

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Author Details

Sarah Azouvi
  • Unaffiliated, Edinburgh, UK
Guy Goren
  • Protocol Labs, Haifa, Israel
Lioba Heimbach
  • ETH Zurich, Switzerland
Alexander Hicks
  • University College London, UK

Acknowledgements

We thank Andrei Constantinescu for the helpful ideas and discussions.

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Sarah Azouvi, Guy Goren, Lioba Heimbach, and Alexander Hicks. Base Fee Manipulation in Ethereum’s EIP-1559 Transaction Fee Mechanism. In 37th International Symposium on Distributed Computing (DISC 2023). Leibniz International Proceedings in Informatics (LIPIcs), Volume 281, pp. 6:1-6:22, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2023) https://doi.org/10.4230/LIPIcs.DISC.2023.6

Abstract

In 2021 Ethereum adjusted the transaction pricing mechanism by implementing EIP-1559, which introduces the base fee - a network fee that is burned and dynamically adjusts to the network demand. The authors of the Ethereum Improvement Proposal (EIP) noted that a miner with more than 50% of the mining power could be incentivized to deviate from the honest mining strategy. Instead, such a miner could propose a series of empty blocks to artificially lower demand and increase her future rewards. In this paper, we generalize this attack and show that under rational player behavior, deviating from the honest strategy can be profitable for a miner with less than 50% of the mining power. We show that even when miners do not collaborate, it is at times rational for smaller miners to join the attack. Finally, we propose a mitigation to address the identified vulnerability.

Subject Classification

ACM Subject Classification
  • Theory of computation → Algorithmic game theory and mechanism design
  • Applied computing → Economics
Keywords
  • blockchain
  • Ethereum
  • transaction fee mechanism
  • EIP-1559

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Supplementary Materials

References

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