Authors: Juan Pablo Madrigal-Cianci [email protected]

Revisions History

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Introduction

Objectives

This specification details the transaction fee mechanism (TFM) for the Logos Blockchain Execution Market, which encompasses the finite resources of on-chain computation. The design is engineered to achieve four primary, interconnected objectives:

1. To implement a market that allocates execution resources to transactions that derive the highest economic value from it, ensuring the network's limited capacity is used to maximize total utility.
2. To create an environment where the process of bidding for execution is intuitive and the transaction costs are predictable. This is paramount for fostering a healthy developer ecosystem and serving the professional entities that are the intended primary users of the Logos Blockchain network.
3. To design a system of rules where the dominant, profit-maximizing strategy for all participants (users and block builders) is to behave honestly and in accordance with the protocol's intended function. This minimizes the potential for manipulative behaviors like transaction censorship or mempool gaming.
4. To ensure that network usage contributes directly to the economic value of the native Logos Blockchain token, creating a positive feedback loop between network adoption and the health of its underlying asset.

Design Rationale

The design is founded on a target-based mechanism, philosophically aligned with Ethereum's EIP-1559. This model is crucial for long-term network health and security, as it actively steers execution utilization around a predefined target. This ensures the network remains performant and accessible for nodes with minimal hardware specifications, thereby promoting decentralization.

To further enhance security, this specification addresses a known vulnerability in the classic EIP-1559 design. As demonstrated by recent research (Cachin et al., 2023), EIP-1559 is susceptible to base fee manipulation by rational, non-myopic block builders. Our design incorporates a direct mitigation for this threat, as proposed in Cachin et al., 2023: an Exponential Moving Average (EMA) based update rule for the base fee. Given the EMA nature of this update, these enhancements smooth fluctuations in execution gas consumption, making the protocol significantly more resilient to strategic manipulation without compromising its core benefits of responsiveness and predictability

Furthermore, as opposed to the standard EIP-1559 mechanism, where base fee is burned and tips are immediately given to miners, in our setting we burn fees, and later, we mint rewards to which we add tips which are given to the block builders at a later block through the [1.0.0] Anonymous Leaders Reward Protocol , for privacy preservation.

Overview

Our fee mechanism adapts Ethereum's EIP-1559 to the specific economic and security goals of the Logos Blockchain network. It provides predictable execution gas costs for users while creating a robust incentive structure for block builders and Blend nodes that minimizes harmful emergent strategies.

The mechanism operates on four core principles:

• Dynamic Base Fee: A protocol-defined base_fee for Execution Gas must be paid for a transaction to be included in a block. This fee adjusts automatically based on a smoothed average of recent network demand relative to a predefined capacity target, ensuring sustainable network load. This base_fee is the minimal threshold to be paid for the transaction to be accepted by the block builder.
• Priority Fee (Tip): To incentivize faster inclusion by block builders, users add a priority_fee on top of the base fee. This creates a simple and transparent auction for block space during periods of high demand. The proceeds of this goes to the block builder.