Just looking back over this thread I noticed that quite an important aspect hasn’t really been discussed, namely: Does paying fees to miners (beyond the minimal amount they’d get in tips) help secure the network?
I guess this isn’t attracting a lot of attention right now because fees are pretty low compared to the block reward (something like 3% on average) so any contribution they’re making is fairly insignificant and hardly worth wasting pixels over.
However, already there are some times when fees become significant - the recent case was when ETH crashed and there was a spike in defi activity. It strikes me that times like this are currently the security worst-case for Ethereum: Security spend is abruptly dropping (because ETH crashed) but at the same time the value transacted on-chain is very high. High value transacted on-chain makes attacks - whether rolling back the chain to change transaction order or censoring transactions - more profitable, so we need more security spend to disincentivize them. If there was nothing of value being transacted then there would be nothing to gain by messing with the transaction history, but if there’s a lot of value being transacted then there’s a lot of money to be made.
If this is right then fees paid to miners act as a kind of automatic stabilizer where the security requirement is (at least somewhat) correlated with value transacted, and value transacted is (at least somewhat) correlated with fees paid.
You can then look at this from either end: Either we hold our desired level of security constant and think about the block reward we’d need to get that amount of security, or we look at the amount we’re spending and try to work out how much security we’re getting. If we hold the block reward constant, we’re looking at a loss of least the 3% or so that is currently going to miners, but also some amount potentially much greater than 3% in the low-ETH-value high-transacted-value worst-case. Or if we hold the desired security level constant, we need to raise the block reward not only by the 3% or so that covers the average fees, but also by some additional margin to cover the worst-case. This seems particularly relevant as this EIP is being sold in other venues (not here) as something that will reduce net ETH issuance and thus benefit holders, when in fact it seems to do the opposite.
If we want to keep the proposed fee market mechanism without this effect on network security (or inflation, as you prefer) the alternative would be to put basefees into a fee pool, where they’re spread among all miners mining blocks at about the same time, rather than paying them all to the miner who mines that particular block.
