Revisiting the Primitives of Transaction Fee Mechanism Design
<|reference_start|>Revisiting the Primitives of Transaction Fee Mechanism Design: Transaction Fee Mechanism Design studies auctions run by untrusted miners for transaction inclusion in a blockchain. Under previously-considered desiderata, an auction is considered `good' if, informally-speaking, each party (i.e., the miner, the users, and coalitions of both miners and users) has no incentive to deviate from the fixed and pre-determined protocol.   In this paper, we propose a novel desideratum for transaction fee mechanisms. We say that a TFM is off-chain influence proof when the miner cannot achieve additional revenue by running a separate auction off-chain. While the previously-highlighted EIP-1559 is the gold-standard according to prior desiderata, we show that it does not satisfy off-chain influence proofness. Intuitively, this holds because a Bayesian revenue-maximizing miner can strictly increase profits by persuasively threatening to censor any bids that do not transfer a tip directly to the miner off-chain.   On the other hand, we reconsider the Cryptographic (multi-party computation assisted) Second Price Auction mechanism, which is technically not `simple for miners' according to previous desiderata (since miners may wish to set a reserve by fabricating bids). We show that, in a slightly different model where the miner is allowed to set the reserve directly, this auction satisfies simplicity for users and miners, and off-chain influence proofness.   Finally, we prove a strong impossibility result: no mechanism satisfies all previously-considered properties along with off-chain influence proofness, even with unlimited supply, and even after soliciting input from the miner.<|reference_end|>
@article{ganesh2024revisiting,
    title={Revisiting the Primitives of Transaction Fee Mechanism Design},
    author={Aadityan Ganesh, Clayton Thomas, S. Matthew Weinberg},
    journal={arXiv preprint arXiv:2410.07566},
    year={2024},
    doi={10.1145/3670865.3673621},
    archivePrefix={arXiv},
    eprint={2410.07566},
    primaryClass={cs.GT econ.TH}
}