The Future of Gas Markets: Dynamic Pricing and MEV

First-price auctions on public mempools are inefficient and extractive. Users overpay, and searchers engage in wasteful, latency-sensitive bidding wars that generate negative externalities for the network.

• Wasted Gas: ~$100M+ annually in failed PGA transactions.
• User Obfuscation: Bots front-run predictable transactions.
• Network Congestion: PGAs exacerbate block space volatility.

Protocols like Flashbots' SUAVE aim to decentralize the block building market. By creating a neutral, competitive marketplace for orderflow and block space, it separates transaction inclusion from execution.

• MEV Democratization: Searchers compete on execution quality, not just speed.
• Better Pricing: Users get expressiveness via intents, not just gas bids.
• Chain-Agnostic: A single decentralized mempool for multiple blockchains.

Intent-based architectures shift the paradigm from 'how' to 'what'. Users submit desired outcomes, and a network of solvers competes to fulfill them optimally, abstracting away gas and MEV complexity.

• Cost Efficiency: Solvers internalize MEV for better user prices.
• Gasless UX: Users sign intents, not gas-paid transactions.
• Cross-Chain Native: Systems like UniswapX and Across use intents for seamless bridging and swapping.

The PBS (Proposer-Builder Separation) model has led to builder centralization, with a few entities like Titan and Relayooor controlling >80% of Ethereum blocks. This creates systemic risk and potential censorship.

• Censorship Risk: Centralized points of failure for transaction filtering.
• Economic Centralization: MEV profits concentrate, reducing network resilience.
• Opaque Markets: Lack of transparency in block construction.

Encrypting transaction content until block inclusion neutralizes front-running and malicious MEV. Projects like Shutter Network use threshold encryption to enable fair, private transaction ordering.

• Front-Running Proof: Transaction details are hidden from searchers.
• Fair Ordering: Decryption occurs only after a block is proposed.
• Protocol-Level: Can be integrated into chains like EigenLayer and Gnosis Chain.

EIP-1559's base fee is a first step. The endgame is fully dynamic, multidimensional fee markets that price compute, storage, and congestion separately, as envisioned by Vitalik Buterin. This enables sustainable scaling.

• Predictable Fees: Smoother base fee reduces volatility.
• Multi-Dimensional Pricing: Separately price EVM opcodes and state access.
• Efficiency: Aligns network resource cost with user payment.

The professionalization of MEV (e.g., Jito, Flashbots) creates a new, opaque layer of infrastructure dependency. Relayers, builders, and searchers can form cartels, leading to censorship risks and single points of failure that threaten chain liveness.

• Risk: Builder dominance can exceed 80% market share, enabling transaction filtering.
• Consequence: Protocol-level MEV (e.g., CowSwap, UniswapX) becomes a battleground, not a solution.

EIP-1559's base fee and priority fee mechanisms are predictable. Truly dynamic, auction-based gas markets (e.g., TGas on Solana) are not. Malicious actors can spam low-value transactions to artificially inflate the clearing price, creating self-reinforcing fee spirals.

• Attack Cost: As low as the cost to trigger one fee spike.
• Impact: Paralyzes the network for all users, making cost prediction impossible for wallets like MetaMask.

Each Optimistic Rollup and ZK-Rollup (e.g., Arbitrum, zkSync) operates its own mini-gas market. This fragments liquidity and MEV, creating arbitrage inefficiencies and cross-domain MEV risks. Bridges like Across and LayerZero become critical, but their oracles and relayers are new attack surfaces.

• Risk: A gas auction war on one L2 can drain liquidity from bridges.
• Consequence: Cross-chain intent systems fail, breaking composability.

When gas becomes a programmable, intent-based commodity (via ERC-4337 account abstraction or SUAVE), it enters regulatory gray areas. OFAC-sanctioned addresses could be blocked not by miners, but by the fee market logic itself, embedding compliance at the protocol layer.

• Precedent: Tornado Cash sanctions targeted smart contract code.
• Outcome: Developers face liability for the economic censorship their fee logic enables.

First-price auctions on Ethereum waste ~$400M+ annually in overpayment and create a toxic UX. Users overbid to avoid delays, while validators capture the surplus. This model is fundamentally adversarial and inefficient.

• Key Benefit 1: Eliminates >90% of gas overpayment through efficient clearing prices.
• Key Benefit 2: Reduces failed transaction rates and front-running surface.

Dynamic pricing via time-based fee markets (like Solana) or EIP-1559's base fee decouples fee urgency from bid wars. The base fee burns excess, while priority fees target inclusion speed. This creates predictable, stable pricing for users.

• Key Benefit 1: ~50% lower fee volatility for standard transactions.
• Key Benefit 2: Creates a deflationary pressure and predictable revenue for validators.

Maximal Extractable Value (MEV) from arbitrage, liquidations, and front-running is a $500M+ annual tax on users. It creates network congestion, increases costs for all, and centralizes block production in the hands of sophisticated searchers.

• Key Benefit 1: Recaptures value for users and applications, not just validators.
• Key Benefit 2: Improves chain fairness and decentralization.

Shift from transaction execution to intent declaration. Users specify a desired outcome (e.g., "swap X for Y at best price"), and a network of solvers competes to fulfill it efficiently. SUAVE, UniswapX, and CowSwap are pioneering this. MEV becomes a public good.

• Key Benefit 1: Better prices via solver competition and batch execution.
• Key Benefit 2: Enhanced privacy and resistance to front-running.

Managing native gas tokens across Ethereum, Arbitrum, Polygon, etc. is a multi-step, high-friction process. It locks liquidity, creates security risks via bridging, and is a major barrier to chain abstraction. This fragments liquidity and user experience.

• Key Benefit 1: Enables single-chain UX for multi-chain interactions.
• Key Benefit 2: Unlocks billions in stranded liquidity across L2s.

ERC-4337 Account Abstraction and Paymaster contracts allow users to pay fees in any token, or have fees sponsored by dApps. Combined with intents, this enables gasless transactions and seamless cross-chain actions via systems like LayerZero and Across.

• Key Benefit 1: Zero-gas onboarding and sponsored transactions.
• Key Benefit 2: Unifies asset management across the modular stack.