laconicd-deprecated/x/feemarket/spec/01_concepts.md

Concepts

EIP-1559: Fee Market

EIP-1559 describes a pricing mechanism that was proposed on Ethereum to improve to calculation of transaction fees. It includes a fixed-per-block network fee that is burned and dynamically expands/contracts block sizes to deal with peaks of network congestion.

Before EIP-1559 the transaction fee is calculated with

fee = gasPrice * gasLimit

where gasPrice is the price per gas and gasLimit describes the amount of gas required to perform the transaction. The more complex operations a transaction requires, the higher the gasLimit (See Executing EVM bytecode). To submit a transaction, the signer needs to specify the gasPrice.

With EIP-1559 enabled, the transaction fee is calculated with

fee = (baseFee + priorityTip) * gasLimit

where baseFee is the fixed-per-block network fee per gas and priorityTip is an additional fee per gas that can be set optionally. Note, that both the base fee and the priority tip are gas prices. To submit a transaction with EIP-1559, the signer needs to specify the gasFeeCap, which is the maximum fee per gas they are willing to pay in total. Optionally, the priorityTip can be specified, which covers both the priority fee and the block's network fee per gas (aka: base fee).

::: tip The Cosmos SDK uses a different terminology for gas than Ethereum. What is called gasLimit on Ethereum is called gasWanted on Cosmos. You might encounter both terminologies on Evmos since it builds Ethereum on top of the SDK, e.g. when using different wallets like Keplr for Cosmos and Metamask for Ethereum. :::

Base Fee

The base fee per gas (aka base fee) is a global gas price defined at the consensus level. It is stored as a module parameter and is adjusted at the end of each block based on the total gas used in the previous block and gas target (block gas limit / elasticity multiplier):

• it increases when blocks are above the gas target,
• it decreases when blocks are below the gas target.

Instead of burning the base fee (as implemented on Ethereum), the feemarket module allocates the base fee for regular Cosmos SDK fee distribution.

Priority Tip

In EIP-1559, the max_priority_fee_per_gas, often referred to as tip, is an additional gas price that can be added to the baseFee in order to incentivize transaction prioritization. The higher the tip, the more likely the transaction is included in the block.

Until the Cosmos SDK version v0.46, however, there is no notion of transaction prioritization. Thus, the tip for an EIP-1559 transaction on Ethermint should be zero (MaxPriorityFeePerGas JSON-RPC endpoint returns 0). Have a look at the mempool docs to read more about how to leverage transaction prioritization.

Effective Gas price

For EIP-1559 transactions (dynamic fee transactions) the effective gas price describes the maximum gas price that a transaction is willing to provide. It is derived from the transaction arguments and the base fee parameter. Depending on which one is smaller, the effective gas price is either the baseFee + tip or the gasFeeCap

min(baseFee + gasTipCap, gasFeeCap)

Local vs. Global Minimum Gas Prices

Minimum gas prices are used to discard spam transactions in the network, by raising the cost of transactions to the point that it is not economically viable for the spammer. This is achieved by defining a minimum gas price for accepting txs in the mempool for both Cosmos and EVM transactions. A transaction is discarded from the mempool if it doesn't provide at least one of the two types of min gas prices:

Minimum gas prices are used to discard spam transactions in the network, by raising the cost of transactions to the point that it is not economically viable for the spammer. This is achieved by defining a minimum gas price for accepting txs in the mempool for both Cosmos and EVM transactions. A transaction is discarded from the mempool if it doesn't provide at least one of the two types of min gas prices:

1. the local min gas prices that validators can set on their node config and
2. the global min gas price, which is set as a parameter in the feemarket module, which can be changed through governance.

The lower bound for a transaction gas price is determined by comparing of gas price bounds according to three cases:

1. If the effective gas price (effective gas price = base fee + priority tip) or the local minimum gas price is lower than the global MinGasPrice (min-gas-price (local) < MinGasPrice (global) OR EffectiveGasPrice < MinGasPrice), then MinGasPrice is used as a lower bound.

2. If transactions are rejected due to having a gas price lower than MinGasPrice, users need to resend the transactions with a gas price higher or equal to MinGasPrice.

3. If the effective gas price or the local minimum-gas-price is higher than the global MinGasPrice, then the larger value of the two is used as a lower bound. In the case of EIP-1559, users must increase the priority fee for their transactions to be valid.

The comparison of transaction gas price and the lower bound is implemented through AnteHandler decorators. For EVM transactions, this is done in the EthMempoolFeeDecorator and EthMinGasPriceDecorator AnteHandler and for Cosmos transactions in NewMempoolFeeDecorator and MinGasPriceDecorator AnteHandler.

::: tip If the base fee decreases to a value below the global MinGasPrice, it is set to the MinGasPrice. This is implemented, so that the base fee can't drop to gas prices that wouldn't allow transactions to be accepted in the mempool, because of a higher MinGasPrice. :::