What Is a ‘Gas War’ and Why Is It a Negative Externality of MEV?
A gas war occurs when multiple searchers compete to execute the same profitable MEV transaction by continuously bidding up the gas price. This drives transaction fees to extremely high levels, often resulting in network congestion and pricing out regular users.
It is a negative externality because the high fees harm the general user experience and network efficiency.
Glossar
Transaction Fees
Cost ⎊ Transaction fees represent a quantifiable expense incurred for processing and validating transactions across diverse financial systems, functioning as a critical component of network participation and security.
Rollups
Technology ⎊ These are Layer 2 scaling solutions designed to process numerous off-chain transactions and then submit a single, compressed proof of their validity back to the main chain for final settlement.
Negative Externality
Externality ⎊ A cost imposed on third parties not directly involved in a transaction, such as the degradation of network performance or worse execution prices imposed on general users due to MEV extraction activities.
Network Congestion
Latency ⎊ Network congestion within cryptocurrency, options trading, and financial derivatives manifests as increased latency, directly impacting execution speeds and potentially leading to adverse selection against slower participants.
Base Fee Mechanism
Mechanism ⎊ The base fee mechanism, prevalent in Ethereum and increasingly adopted in other blockchains, represents a dynamic transaction fee structure designed to maintain network stability and predictable block times.
Gas War
War ⎊ A state of intense, rapid competition where network users aggressively increase their transaction fees to secure faster inclusion or higher priority within a block, typically during periods of high demand or network saturation.