Briefing
The core research problem addressed is the systemic vulnerability of current transaction fee mechanisms (TFMs), specifically EIP-1559, to miner coercion and censorship threats that maximize off-chain revenue. The foundational breakthrough is the introduction of a new, necessary theoretical property ∞ “Off-Chain Influence Proofness,” which is satisfied when a block producer cannot gain additional revenue by running a separate, private auction or threatening to censor on-chain bids. The analysis rigorously demonstrates that EIP-1559 fails this test, as a rational, revenue-maximizing miner can strictly increase profits by threatening to censor transactions that do not pay a direct, off-chain tip. The single most important implication is that achieving truly fair and non-coercive transaction ordering requires adopting cryptographically-assisted TFMs, such as a modified Cryptographic Second Price Auction, to structurally eliminate the economic incentive for block producers to engage in off-chain influence.
Context
The prevailing theoretical gold standard for transaction fee mechanisms has been EIP-1559, designed to provide a predictable fee market by algorithmically adjusting a base fee that is burned, leaving only a priority fee (tip) for the block producer. This mechanism was widely adopted based on prior desiderata that focused on simplicity for users and miners, aiming to prevent miner manipulation of the on-chain fee. However, this established theory overlooked a critical vector for adversarial behavior ∞ the miner’s ability to leverage their position as the block producer to exert influence over users in off-chain communication channels, effectively forcing users to pay a premium under the implicit threat of censorship. This pre-existing theoretical limitation permitted a form of Maximal Extractable Value (MEV) extraction that was not accounted for in the original mechanism’s security analysis.
Analysis
The paper’s core mechanism is the formal definition of “Off-Chain Influence Proofness,” a property that mandates a block producer’s revenue must be maximized by simply following the fixed on-chain protocol, regardless of any side communication or private threats. The foundational idea is that if a Bayesian revenue-maximizing block producer can increase their profits by persuading users to pay an off-chain tip through a credible threat of censorship, the TFM is fundamentally flawed. The proposed solution is a reconsideration of the Cryptographic Second Price Auction (CSP), which uses multi-party computation to process bids.
In this revised model, the block producer is allowed to set a reserve price directly. This mechanism fundamentally differs from EIP-1559 by making the fee determination process cryptographically enforced and transparently managed, ensuring that the block producer’s optimal strategy is to adhere to the protocol, thereby structurally eliminating the ability to profit from off-chain threats or side-auctions.
Parameters
- New Desideratum ∞ Off-Chain Influence Proofness – The property that a block producer cannot increase revenue by threatening to censor transactions that do not pay an off-chain tip.
- EIP-1559 Status ∞ Not Off-Chain Influence Proof – The mechanism allows a rational miner to increase profits by threatening to censor bids without a direct tip.
- Proposed Mechanism ∞ Cryptographic Second Price Auction – A multi-party computation-assisted auction where the block producer is allowed to set the reserve price.
Outlook
This research opens a new, necessary avenue for mechanism design, shifting the focus from merely mitigating on-chain MEV to securing the entire transaction inclusion process against off-chain coercion. The next steps involve the practical design and implementation of cryptographically-assisted TFMs, such as the proposed CSP auction, within existing block production pipelines like Proposer-Builder Separation (PBS). In the next three to five years, this theoretical work is expected to drive the development of more robust, censorship-resistant transaction ordering protocols, potentially leading to a new generation of fee mechanisms that provably guarantee fair transaction inclusion by eliminating the economic incentive for block producers to operate outside the protocol’s defined rules.
