Calculating the Impact of EIP-1559 on Transaction Fee Variance

Jack Sanderson


Supervised by Yuhua Li; Moderated by Natasha Edwards

Every blockchain has a "fee market"; this market determines the cost per byte of block space. In the past, during both the 2017 and 2021 bull markets, many blockchains used an antiquated fee market that featured a simple auction system. This caused enormous fluctuations in fees greatly harming the user experience and even causing issues with applications built on top of the network. On August 5th of 2021, the Ethereum blockchain hard-forked onto a version that featured a more advanced fee market system with the goal of increasing fee stability.

The goal of this project would be two fold. First, create an algorithm that can calculate the fee stability before and after the hard-fork. Second, use this algorithm to test the stability of transaction fees. This research would start very basic, building one algorithm and testing it over a short period. Without time constraints it would then grow larger into many algorithms, testing many periods, over many blockchains.

What Problem is Being Solved? As stated previously, fee markets are important. Bad fee markets implemented on Solana, Cardano, and Zcash are responsible for chains halting, states becoming bloated, and applications collapsing. Furthermore, because of the immaturity of the space, no research is going into the effectiveness of these fee markets in achieving the goal of delivering fairly priced block space. I believe this research project could help solve the problem of not knowing how effective fee markets are at delivering stable and fair block space, by simply researching how effective fee markets are at delivering stable and fair block space.

Initial Plan (06/02/2023) [Zip Archive]

Final Report (11/05/2023) [Zip Archive]

Publication Form