Transaction Execution Mechanisms

This paper studies transaction execution mechanisms (TEMs) for blockchains as the efficient resource allocation across multiple parallel execution queues or "local fee markets." We present a model considering capacity constraints, user valuations, and delay costs in a multi-queue system with an aggregate capacity constraint due to global consensus. We show that revenue maximization tends to allocate capacity to the highest-paying queue, while welfare maximization generally serves all queues. Optimal relative pricing of different queues depends on factors such as market size, demand elasticity, and the balance between local and global congestion. Our results have implications for evolving blockchain architectures, including parallel execution, DAG-based systems, and multiple concurrent proposers, and can help design more efficient TEMs.