Definition ∞ Blockspace economics refers to the study of how limited digital ledger space is allocated and priced, influencing transaction fees and network utility. It examines the scarcity of block capacity and the mechanisms, such as auction-based fee markets, that determine who can include their transactions. This field analyzes the incentives that govern the creation and utilization of new blocks.
Context ∞ The economics of blockspace is a focal point in discussions concerning blockchain scalability and transaction costs. Debates often revolve around the effectiveness of current fee mechanisms in balancing demand and supply, and the potential for alternative approaches to reduce congestion. Understanding blockspace economics is key to grasping why transaction fees fluctuate and how different blockchain designs aim to optimize resource allocation.
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