tldr even if ethereum becomes giga successful -- priority fees will probably not rise and may even go down a lot, and that is a good thing.
if ethereum scales in both tech and adoption, base fees (i.e. the fixed fee paid by the marginal transaction for inclusion in the block) can certainly increase a lot, and there isn't really a ceiling for that.
1M txns/s paid $0.1 cent each? that's $315b in run rate revenue per year. something like that is probably Ethereum's bull case for me.
but there is simply no such case for prio fees to increase a lot, and one big reason to believe they will actually continue to fall over time.
for a primer, searchers and retail traders pay prio fees price to access a *specific* piece of state before other transactors. a block can have a base fee of 1 gwei, with someone paying 1m gwei to access the first slot in the block. even though ethereum's adoption and txn activity increased, prio fees have stayed relatively constant at 500-600m/year for the last 4 years.
many mev experts, including me, have predicted that priority fees would likely decrease even as activity increases a lot, and the reason is that most of these conflicts should never "trickle down" to the validator to begin with. they are like free dollar bills that someone drops on the street, and if they are smart, they will simply stop dropping it. and if they are not smart, someone who is will replace their app over time.
when you zoom in on what conflicts searchers are paying for priority in, its primarily two things: arbitrage and liquidations (which are itself a form of arbitrage of buying an underpriced lending market position and selling it for a profit).
in both cases, the conflict used to reach the chain even though there sits someone upstream who could resolve this conflict already: e.g. a wallets running backrunning auctions on their user's orderflow (metamask, rabby, everyone), DEXs selling the first right to arbitrage (angstrom), DEXs paying to update their quotes before the first order can hit per block (propAMMs), lending markets selling the right to liquidate a position (chainlink svr + aave) - the list goes on.
even though I predicted this trend of "apps taking control of their own ordering" for years, 2026 is the year when it finally reached not just wallets but DEXs and lending markets as well, at scale, and Defi is becoming much better for it.
this has several consequences for ethereum: if you think that Defi is ethereum's main usecase and will be responsible for much of its future growth, this trend is amazing. it will make Defi spreads tighter and fees lower, making it ultimately more competitive against cefi and tradfi markets.
second, prio fees will likely never matter again for stakers, and should not be a big part of the discussion for issuance reduction. another update that comes up occasionally is mev-burn - on the face of it, probably not worth the complexity.
if you take away one thing from the thread, its that "95% of priority fees belong the apps or wallets who create them, and will flow there over time". ethereum has been benefiting from the inefficiency of the apps built on top of it for so much value to trickle down, but this trend is now in full reversal. and a future when apps make trillions of trading and lending volume per day, while paying hardly any priority fees - that future is actually very good, because it means the apps are well designed and competitive with tradfi, in spite of running on a blockchain.
if Ethereum wins, it will be on the back of a small base fee that millions of actors pay, that can still accumulate to a whole lot of revenue per year.
if ethereum scales in both tech and adoption, base fees (i.e. the fixed fee paid by the marginal transaction for inclusion in the block) can certainly increase a lot, and there isn't really a ceiling for that.
1M txns/s paid $0.1 cent each? that's $315b in run rate revenue per year. something like that is probably Ethereum's bull case for me.
but there is simply no such case for prio fees to increase a lot, and one big reason to believe they will actually continue to fall over time.
for a primer, searchers and retail traders pay prio fees price to access a *specific* piece of state before other transactors. a block can have a base fee of 1 gwei, with someone paying 1m gwei to access the first slot in the block. even though ethereum's adoption and txn activity increased, prio fees have stayed relatively constant at 500-600m/year for the last 4 years.
many mev experts, including me, have predicted that priority fees would likely decrease even as activity increases a lot, and the reason is that most of these conflicts should never "trickle down" to the validator to begin with. they are like free dollar bills that someone drops on the street, and if they are smart, they will simply stop dropping it. and if they are not smart, someone who is will replace their app over time.
when you zoom in on what conflicts searchers are paying for priority in, its primarily two things: arbitrage and liquidations (which are itself a form of arbitrage of buying an underpriced lending market position and selling it for a profit).
in both cases, the conflict used to reach the chain even though there sits someone upstream who could resolve this conflict already: e.g. a wallets running backrunning auctions on their user's orderflow (metamask, rabby, everyone), DEXs selling the first right to arbitrage (angstrom), DEXs paying to update their quotes before the first order can hit per block (propAMMs), lending markets selling the right to liquidate a position (chainlink svr + aave) - the list goes on.
even though I predicted this trend of "apps taking control of their own ordering" for years, 2026 is the year when it finally reached not just wallets but DEXs and lending markets as well, at scale, and Defi is becoming much better for it.
this has several consequences for ethereum: if you think that Defi is ethereum's main usecase and will be responsible for much of its future growth, this trend is amazing. it will make Defi spreads tighter and fees lower, making it ultimately more competitive against cefi and tradfi markets.
second, prio fees will likely never matter again for stakers, and should not be a big part of the discussion for issuance reduction. another update that comes up occasionally is mev-burn - on the face of it, probably not worth the complexity.
if you take away one thing from the thread, its that "95% of priority fees belong the apps or wallets who create them, and will flow there over time". ethereum has been benefiting from the inefficiency of the apps built on top of it for so much value to trickle down, but this trend is now in full reversal. and a future when apps make trillions of trading and lending volume per day, while paying hardly any priority fees - that future is actually very good, because it means the apps are well designed and competitive with tradfi, in spite of running on a blockchain.
if Ethereum wins, it will be on the back of a small base fee that millions of actors pay, that can still accumulate to a whole lot of revenue per year.
https://x.com/hasufl/status/2073871364566536312
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