The Information Content of Blockchain Fees

Abstract

Decentralized exchanges DEXs allow traders to express their willingness to pay for quick execution through a public priority fee bidding mechanism. We provide empirical evidence that high-fee DEX trades are more informative and contribute more to price discovery. Using address-level blockchain transaction data, we show that informed traders persistently bid higher fees to secure early execution, revealing a strong willingness to pay for execution priority. Further, analysis of Ethereum mempool data demonstrates that informed traders employ a "jump bidding" strategy, placing high initial bids to deter potential competitors.