Towards a Functional Fee Market for Cryptocurrencies

Understand

Blockchain-based cryptocurrencies prioritize transactions based on their fees, creating a unique kind of fee market.

• Empirically, this market has failed to yield stable equilibria with predictable prices for desired levels of service.
• We argue that this is due to the absence of a dominant strategy equilibrium in the current fee mechanism.
• We propose an alternative fee setting mechanism that is inspired by generalized second price auctions.