Max Priority Fee Per Gas

Max Priority Fee Per Gas is the portion of a transaction fee, denominated in gwei, that a user specifies as a direct tip to the block proposer (miner or validator) for prioritizing their transaction's inclusion. It is a key component of the EIP-1559 fee model, operating alongside the Base Fee. The total fee a user pays per unit of gas is calculated as Base Fee + Min(Max Priority Fee, Max Fee - Base Fee). This mechanism separates the fee burned by the protocol (the base fee) from the optional tip that incentivizes block builders.

When a user submits a transaction, they set a Max Fee Per Gas (the absolute maximum they are willing to pay) and a Max Priority Fee Per Gas. The network's current Base Fee is burned. The effective priority fee is the smaller of the user's specified Max Priority Fee and the difference between their Max Fee and the Base Fee (Max Fee - Base Fee). This design ensures users can set a high Max Fee to guarantee inclusion during volatile periods while controlling their maximum tip. Validators are economically incentivized to order transactions by the size of this priority fee, making it the primary tool for users to expedite their transactions.

Setting an appropriate Max Priority Fee is a strategic decision for users. During periods of low network congestion, a tip of 1-2 gwei may suffice. In high-demand environments, users must increase this tip to outbid others for block space. Wallets and services often provide Gas Estimation APIs that suggest optimal values based on current mempool activity and desired confirmation speed. It's crucial to understand that if the Base Fee rises above the user's Max Fee, the transaction will remain pending or fail, regardless of the priority fee set.

This fee structure creates a more predictable and efficient auction for block space. The Base Fee adjusts algorithmically per block based on network demand, while the Max Priority Fee represents a pure market bid for priority. For validators, the total priority fees from all transactions in a block constitute their direct reward, supplementing the block subsidy and MEV (Maximal Extractable Value) opportunities. This clear separation allows for better fee estimation and reduces the inefficiencies and unpredictability of the legacy first-price auction model.

The Max Priority Fee Per Gas is the portion of a transaction's total gas fee that is paid directly to the block proposer (validator) as a tip, incentivizing them to prioritize the transaction's inclusion in the next block. It is set by the user or wallet and is paid on top of the network's Base Fee Per Gas, which is algorithmically determined and burned. This separation of fees into a burned base fee and a miner tip is the core innovation of Ethereum's EIP-1559 upgrade, creating a more predictable and efficient fee market.

When submitting a transaction, a user specifies both a Max Fee Per Gas (the absolute maximum they are willing to pay per unit of gas) and the Max Priority Fee Per Gas. The total effective fee per gas is calculated as min(Max Fee, Base Fee + Max Priority Fee). The priority fee is the variable component that users can adjust to compete for block space. If the base fee rises unexpectedly, the system will first deduct the base fee, and the remaining amount (up to the Max Priority Fee) becomes the actual tip. If Max Fee < (Base Fee + Max Priority Fee), the transaction will be stuck until gas prices fall.

Setting this fee requires estimating network demand. Wallets and services often provide Gas Estimation APIs that suggest an appropriate Max Priority Fee based on recent block history and desired confirmation speed. A higher tip increases the likelihood of quick inclusion in the next 1-2 blocks, while a lower tip may result in delays. During times of low congestion, a minimal tip (e.g., 1-2 Gwei) is often sufficient, whereas during network spikes (e.g., an NFT mint), tips can soar to hundreds of Gwei to outbid other pending transactions.

It is crucial to distinguish this from the legacy Gas Price model. Pre-EIP-1559, users set a single gas price that was entirely paid to miners. Post-EIP-1559, the fee is split, with the base fee being burned (removed from circulation) and only the priority fee going to the validator. This design reduces fee volatility for users and introduces a deflationary mechanism for ETH. The Max Priority Fee is thus the user's direct bid for validator attention within the new economic framework.

In practice, transaction builders must ensure the math between Max Fee and Max Priority Fee is sound. A transaction with a Max Fee of 100 Gwei and a Max Priority Fee of 2 Gwei signals a willingness to pay a 2 Gwei tip, but only if the base fee is 98 Gwei or lower. If the base fee is 99 Gwei, the effective tip is reduced to 1 Gwei. If the base fee is 100 Gwei or higher, the effective tip is zero, and the transaction is unlikely to be included until congestion eases.

In the EIP-1559 fee model, the total fee a user pays per unit of gas is the sum of two distinct components: the Base Fee and the Max Priority Fee Per Gas. The Base Fee is algorithmically determined and burned by the protocol, while the Max Priority Fee is a direct tip to the block proposer (validator). This separation creates a predictable base cost for inclusion and a competitive market for transaction ordering. Users set a maxPriorityFeePerGas to incentivize validators to prioritize their transaction within the next block.

The Max Priority Fee Per Gas is the primary tool users have to influence transaction speed. When network demand is high, validators are economically motivated to select transactions with the highest tips to maximize their rewards. If this fee is set too low, a transaction may be delayed across multiple blocks until a validator includes it. Crucially, this tip is paid on top of the mandatory Base Fee. The actual priorityFee paid is the minimum of the user's maxPriorityFeePerGas and the difference between the total maxFeePerGas and the current block's Base Fee.

Visualizing this, a transaction with a maxFeePerGas of 150 gwei and a maxPriorityFeePerGas of 10 gwei, entering a block with a Base Fee of 100 gwei, would result in a total cost of 110 gwei. The validator receives the full 10 gwei tip. However, if the Base Fee rose to 145 gwei, the same transaction would only have 5 gwei remaining from its total max fee (150 - 145). The validator would then receive only 5 gwei as the effective tip, as it is the lower of the user's max tip (10 gwei) and the remaining fee space.

This structure provides key benefits: fee predictability through the Base Fee, explicit competition for block space via the tip, and protection against overpayment through the maxFeePerGas cap. Wallets and users must strategically balance these two values—setting a maxPriorityFeePerGas high enough for timely inclusion while ensuring the maxFeePerGas is sufficient to cover potential Base Fee increases before the transaction is mined.