Researcher ORCID Identifier

https://orcid.org/0000-0003-0382-6572

Graduation Year

2021

Date of Submission

5-2021

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Yaron Raviv

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

2021 Xuehan Jiang

Abstract

EIP 1559 was proposed to improve the Ethereum transaction mechanism as current transaction fees have been observed to become unacceptably high and threaten the viability and sustainable growth of the Ethereum network. This paper compares and analyzes the current and proposed EIP 1559 transaction fee mechanism, and offers a game-theoretic analysis of the three main aspects: transaction fee volatility, user experience, and the possibility of potential miner attacks. We provide further evidence of the problems and limitations of the current transaction mechanism. We find that EIP 1559 lowers the transaction fee volatility and improves the user experience by providing a more predictable bidding price and an obvious optimal bidding strategy under certain conditions. However, EIP 1559 compared to the current transaction fee mechanism has a higher chance to incentivize miner collusion. Two alternative mechanisms are provided.

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