Transaction fee economics in the Ethereum blockchain

We study the economic determinants of transaction fees in the Ethereum blockchain. We estimate an empirical model based on queueing theory and analyze the factors determining the “gas price” (transaction cost per unit of service, “gas”). Using block‐ and transaction‐level data from the Ethereum bloc...

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Bibliographic Details
Published in:Economic inquiry 2022-01, Vol.60 (1), p.265-292
Main Authors: Donmez, Anil, Karaivanov, Alexander
Format: Article
Language:English
Subjects:
Blockchain
Ethereum
Fees & charges
Queueing
queueing theory
time series
transaction fees
Transactions
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Summary:We study the economic determinants of transaction fees in the Ethereum blockchain. We estimate an empirical model based on queueing theory and analyze the factors determining the “gas price” (transaction cost per unit of service, “gas”). Using block‐ and transaction‐level data from the Ethereum blockchain, we show that changes in service demand significantly affect the gas price—when there is high block utilization, per‐unit fees increase on average, with strong nonlinear effect above 90% utilization. The transaction type is another important factor—larger fraction of regular transactions (direct transfers between users) is associated with higher gas price.
ISSN:0095-2583
1465-7295
DOI:10.1111/ecin.13025