License: Creative Commons Attribution 4.0 International license (CC BY 4.0)
When quoting this document, please refer to the following
DOI: 10.4230/LIPIcs.AFT.2023.4
URN: urn:nbn:de:0030-drops-191933
Go to the corresponding LIPIcs Volume Portal

Diamandis, Theo ; Evans, Alex ; Chitra, Tarun ; Angeris, Guillermo

Designing Multidimensional Blockchain Fee Markets

LIPIcs-AFT-2023-4.pdf (0.8 MB)


Public blockchains implement a fee mechanism to allocate scarce computational resources across competing transactions. Most existing fee market designs utilize a joint, fungible unit of account (e.g., gas in Ethereum) to price otherwise non-fungible resources such as bandwidth, computation, and storage, by hardcoding their relative prices. Fixing the relative price of each resource in this way inhibits granular price discovery, limiting scalability and opening up the possibility of denial-of-service attacks. As a result, many prominent networks such as Ethereum and Solana have proposed multidimensional fee markets. In this paper, we provide a principled way to design fee markets that efficiently price multiple non-fungible resources. Starting from a loss function specified by the network designer, we show how to dynamically compute prices that align the network’s incentives (to minimize the loss) with those of the users and miners (to maximize their welfare), even as demand for these resources changes. We derive an EIP-1559-like mechanism from first principles as an example. Our pricing mechanism follows from a natural decomposition of the network designer’s problem into two parts that are related to each other via the resource prices. These results can be used to efficiently set fees in order to improve network performance.

BibTeX - Entry

  author =	{Diamandis, Theo and Evans, Alex and Chitra, Tarun and Angeris, Guillermo},
  title =	{{Designing Multidimensional Blockchain Fee Markets}},
  booktitle =	{5th Conference on Advances in Financial Technologies (AFT 2023)},
  pages =	{4:1--4:23},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-303-4},
  ISSN =	{1868-8969},
  year =	{2023},
  volume =	{282},
  editor =	{Bonneau, Joseph and Weinberg, S. Matthew},
  publisher =	{Schloss Dagstuhl -- Leibniz-Zentrum f{\"u}r Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{},
  URN =		{urn:nbn:de:0030-drops-191933},
  doi =		{10.4230/LIPIcs.AFT.2023.4},
  annote =	{Keywords: Blockchains, transaction fees, convex optimization, mechanism design}

Keywords: Blockchains, transaction fees, convex optimization, mechanism design
Collection: 5th Conference on Advances in Financial Technologies (AFT 2023)
Issue Date: 2023
Date of publication: 18.10.2023
Supplementary Material: Software (Source Code): archived at:

DROPS-Home | Fulltext Search | Imprint | Privacy Published by LZI