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Estimating EIP-1559 Fee Burns Under Different MEV Classification Rates

Article Paradigm research
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Summary

The analysis estimates how EIP-1559 could change miner revenue by separating block subsidies, transaction inclusion fees, and miner-extractable value (MEV). Under the proposal described, subsidies and MEV remain with miners, while base fees are burned; fees paid during congestion can still provide miners with additional revenue. The analysis uses Flashbots’ MEV dashboard to identify transactions by execution patterns and treat the identified MEV as a starting point for estimating the fee share at risk of being burned.

It presents a lower bound based on the dashboard’s recognized MEV and alternative estimates that assume it classifies 67%, 50%, or 33% of MEV. The authors estimate that the burned share of miner revenue would be at most 20% to 35%, disputing claims that it would exceed half. These are assumption-based estimates, not definitive bounds: unrecognized MEV may be substantial and evolving, MEV transactions also pay base fees, non-MEV transactions may tip during congestion, and the analysis omits MEV miners extract directly.

Key ideas

  • Miner revenue includes block subsidies, transaction fees, and MEV, which EIP-1559 affects differently.
  • The analysis treats dashboard-identified MEV as a lower-bound estimate because classification is incomplete.
  • Alternative assumptions about the share of classified MEV produce different estimates of fees burned.
  • Congestion tips, base fees paid by MEV transactions, and directly extracted MEV limit the estimate’s precision.

Tags

CryptoDeFiMarket microstructureRisk management

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.