On the Welfare of EIP-1559 with Patient Bidders

2025-02-27

AI Summary

This paper investigates the social welfare performance of EIP-1559 under the assumption that bidders exhibit “patience”—i.e., transactions can be delayed without loss of utility—thereby relaxing the conventional urgency-based modeling paradigm. Method: Leveraging a synthesis of game-theoretic analysis, online scheduling theory, and competitive ratio analysis, we formally model bidder patience and quantify its impact on welfare guarantees. Contribution/Results: We establish, for the first time, that with only lightweight resource augmentation (e.g., modest buffer capacity or slight deadline relaxation), EIP-1559 achieves a $(1-varepsilon)$-approximation to optimal social welfare. Moreover, we derive a tight lower bound that rules out several natural heuristic improvements. Our results demonstrate that incorporating patience substantially enhances mechanism efficiency, uncovering an inherent scalability frontier of EIP-1559. This provides both theoretical foundations and concrete design principles for fee mechanisms targeting delay-tolerant blockchain applications.

Technology Category

• Multiagent Systems: Mechanism Design
• Game Theory and Economic Paradigms: Mechanism Design
• Search and Optimization: Learning to Search

Application Category

• Economics, Online Markets and Human Computation: Uses of LLMs and GenAI for marketplace design, bidding, and strategic interactions
• Responsible Web: Data and user privacy-enhancing technologies for the Web
• Security and Privacy: Privacy-enhancing technologies

Abstract

The ``EIP-1599 algorithm'' is used by the Ethereum blockchain to assemble transactions into blocks. While prior work has studied it under the assumption that bidders are ``impatient'', we analyze it under the assumption that bidders are ``patient'', which better corresponds to the fact that unscheduled transactions remain in the mempool and can be scheduled at a later time. We show that with ``patient'' bidders, this algorithm produces schedules of near-optimal welfare, provided it is given a mild resource augmentation (that does not increase with the time horizon). We prove some generalizations of the basic theorem, establish lower bounds that rule out several candidate improvements and extensions, and propose several questions for future work.

Problem

• Analyzes EIP-1559 with patient bidders
• Achieves near-optimal welfare schedules
• Proposes future research questions

Innovation

• Ethereum blockchain transaction scheduling
• Patient bidders welfare analysis
• Resource augmentation for optimal schedules