Transaction Fees and User Behavior in Blockchain Networks
This project’s aim is to investigate how individual users of blockchain networks alter their behavior in response to varying network fees. To achieve this goal, the study will collect population survey data from a diverse range of blockchain users, analyze the data quantitatively, and identify the factors that influence user behavior with respect to the level of fees. The study’s findings will inform the design and implementation of blockchain systems that promote efficient and effective transaction processing.
This grant proposal aims to address a significant research gap by analyzing the impact of network fees on user behavior in blockchain networks. As far as we can tell, there are no scientific and empirical findings on this topic at the present time, which we identify as a great motivation and necessity to work on this topic.
To date, academic research on transaction fees in blockchain networks and Ethereum focuses on fees from a) an on-chain perspective, i.e., by analyzing and modelling data extracted from the blockchain, b) an engineering perspective, i.e., by proposing new techniques to optimize fees. Research on end users does not yet exist and would be a helpful addition for both practice and academia.
The importance of network fees in the Ethereum network cannot be overstated. In the past, there have been periods of extremely high transaction costs, which some stakeholders consider harmful. Understanding how blockchain users can be motivated to adjust their behavior can help reduce high fee periods and mitigate potential dips. Such understanding allows recommendations for optimizations.
Blockchain technology has transformed the way that value on the web is transacted and exchanged. One key feature of blockchain networks are transaction fees, which are paid to incentivize network participants to process transactions. Fees are determined by the supply and demand dynamics of the network, and they vary based on the level of congestion. While fees are essential for the proper functioning of the network, they also affect user behavior. This grant proposal seeks to investigate the extent to which individual users of blockchain networks change their behavior in response to different levels of network fees. While there is a growing body of research on network fees from a modeling perspective, the role of individual blockchain users and their views and motivations has not been considered at all. This represents a significant research gap.
The primary research question for this study is: How do individual users of blockchain networks alter their behavior in response to varying network fees?
To answer the research question, this study aims to:
- Collect population survey data from blockchain users to assess their behavior in response to different levels of network fees.
- Empirically evaluate the survey data to identify the relationship between network fees and user behavior.
The study will utilize an empirical approach. Firstly, a population survey will be designed and conducted to collect data on user behavior in response to different levels of network fees. The survey will target a diverse range of blockchain users, including those who use blockchain for speculative investments and those who use blockchain for transactions. The survey will capture data on the frequency of transactions, the average transaction size, and the level of fees paid and further include variables on motivation, self-assessment and other (to-be-determined) characteristics.
Secondly, the survey data will be analyzed using quantitative methods. This includes the use of classic methods of analyzing survey data such as descriptive statistics, factor or cluster analysis, regression models, or other methods. The final choice of methodology depends to some extent on the final survey design.
The study’s primary outcome is to provide a comprehensive understanding of how users of blockchain networks respond to different levels of network fees. By identifying the factors that influence user behavior, the study can provide valuable knowledge to various stakeholders, such as validators, individual and corporate users, blockchain developers, policymakers, and regulators, as they seek to design and implement blockchain systems that promote efficient and effective transaction processing.
The proposed study will fill a significant knowledge gap in the understanding of the impact of network fees on user behavior in blockchain networks. The study’s findings will be relevant to the blockchain industry and provide a foundation for further research on blockchain economics, user behavior, and network design.
The output of the project will be an academic paper that will initially be published as a working paper and later in an academic journal.
We foresee 0.5 full-time equivalent (FTE) over the course of 6 months to work on the project.
Dr. Lennart Ante will lead the project as principal investigator and will be supported by other scientists throughout the project.
Publications of the Blockchain Research Lab:
Some population survey publications of the Blockchain Research Lab:
Google Scholar profile of Dr. Lennart Ante:
Research projects of the Blockchain Research Lab:
The Blockchain Research Lab is also currently working on a grant funded by the Ethereum Foundation which has not been completed yet.
This study aims to investigate the relationship between network fees and user behavior in the blockchain ecosystem by collecting and analyzing population survey data. The survey will target a diverse range of blockchain users, and the analysis will depend on the final survey design.
- The project foresees that in the first two months research, questionnaire development and planning will take place and by the end of month two the questionnaire will be finalized.
- In month three the data will be collected.
- In months four to six, the data are analyzed and the scientific publication for dissemination is prepared. At the end of month six the working paper is published.
The total grant amount requested is 20,000 EUR:
- Personnel cost: 15,000 EUR
- Cost for survey data collection 5,000 EUR