First-Price Sealed-Bid Auction for Ethereum Gas Auction Under Flashbots.

In the block space market of the Ethereum blockchain, miners are the producers who can maximize their revenue—a value called Miner Extrac table Value (MEV)—by including, excluding, or reordering transactions in the blocks they produce. Some special users, arbitrage bots, are aware of MEV and may opt to exploit the existence of MEV to seize arbitrage opportunities in Decentralized Finance (DeFi) applications. These bots usually compete for block space with each other via a gas action process in which bots bid up their gas prices. Due to the lack of symmetric market information, bots blindly issue multiple transactions continuously aiming at the same arbitrage opportunity and they gradually increase the gas prices. Such malicious bidding behavior leads to the problems of transaction congestion and high gas fee in the Ethereum network. Based on the Flashbots project, we propose an Ethereum gas auction model using First Price Sealed-Bid Auction (FPSBA). In our model, the bidding bots no longer need to continue raising their gas bids in response to threats from other bots, and our derived optimal FPSBA bidding strategy under the dominant strategy equilibrium can effectively reduce the bots’ bids in gas action. Our simulation results illustrate that our FPSBA can achieve a lower average bidding price for the biding bots compared to the blind continuous bidding strategy dose in the original Ethereum network, thus it can keep the whole gas price level stable.