Economics of Ethereum

Kose John, Barnabé Monnot, Peter Mueller, Fahad Saleh and Caspar Schwarz-Schilling

Journal of Corporate Finance, 2025, vol. 91, issue C

Abstract: We provide comprehensive background regarding the Ethereum blockchain protocol, focusing especially on the economic incentives of participants. We begin by clarifying the transaction life-cycle from the user perspective, explaining how user transactions are submitted and settled on the blockchain. Thereafter, we explain how the Ethereum protocol selects proposers to propose blocks of transactions for inclusion on the blockchain and also attesters to vote for or against those blocks. We discuss both how the Proof-of-Stake protocol is used to select proposers and attesters, and also how the Gasper protocol is used to aggregate attester votes which thereby determine the finalized blockchain. Finally, we discuss how builders, searchers and relays have arisen to support and enhance the Ethereum block production process. Through our discussion, we clarify the economic trade-offs faced by each participant and the associated real-world decision variables for each participant.

Keywords: Ethereum; Proof-of-Stake; Staking; Proposer–Builder Separation; Gasper; EIP-1559; Proposer; Attester; Builder; Relay; Maximal Extractable Value; MEV; Staking pools; Liquid staking; Liquid Staking Tokens; LSTs (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119924001809
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:91:y:2025:i:c:s0929119924001809

DOI: 10.1016/j.jcorpfin.2024.102718

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().