Priority Gas Auction Cadence and Searcher Competition: Evidence from Flashblocks on Base

2026-10-02

AI Summary

This study investigates the causal impact of shortened auction cycles via Flashblocks on the Base chain upon arbitrageurs’ bidding strategies and competitive dynamics. Methodologically, we construct a difference-in-differences model using purely on-chain address-day panel data. By integrating first-price auction theory with activity-matched control groups, this work provides the first identification of the causal effect of auction cadence on priority fees, revealing that such fees comprise a fixed reserve price and a linear competition premium. Empirical results demonstrate that following the mechanism change, effective priority fees decreased significantly by 59%, accompanied by a substantial reduction in the fee share captured by early blocks. Overall, this research offers critical empirical evidence for optimizing Rollup governance parameters.

Abstract

Flashblocks divide a block's priority gas auction into shorter sequential auctions that commit transaction order before the block is complete. We ask how this auction cadence affects bidding and competition among automated arbitrageurs, or searchers. In July 2025 Base replaced a single 2 s auction with ten 200 ms auctions. We use this change to estimate the searcher response from on-chain data alone. On an address-day panel of 3,032 searchers and 8,053 activity-matched controls, a difference-in-differences design estimates a 0.187 gwei fall in the effective priority fee (59% of the searcher pre-period mean). The share of searcher priority-fee value paid in the first tenth of block gas falls from 0.98 to 0.28. This fee compression is the identified effect. The revert-rate response is not (causally) identified and is reported descriptively. At the level of a single opportunity, the winning fee splits into an approximately invariant floor and a competitive premium. The premium scales about linearly with auction duration at high contention and less steeply at low contention. A first-price auction model with uncertain arrival and partial payments by losing searchers accounts for this pattern. We match attempts to the pool they contest. A higher-fee transaction reverts behind a lower-fee winner that landed earlier in 1.9 to 2.7% of contested opportunities by value, an upper bound. Latency therefore decides part of the ordering. A micro-auction model projects diminishing returns from shortening the window below 200 ms, as bids approach a nonzero floor. Rollups such as Arbitrum One now make auction cadence a governance tunable parameter, so these estimates inform how it is set.

Problem

• Priority Gas Auction
• Searcher Competition
• Auction Cadence
• MEV
• Flashblocks

Innovation

• Priority Gas Auction
• Flashblocks
• Micro-auction
• Searcher Competition
• Difference-in-Differences