PriorityFeeTax

How it works

Position in a block is worth something only to flow that is racing: an arbitrageur closing a gap against a centralized venue, a liquidator, a sandwicher. A person swapping a hundred dollars of one token for another does not care whether they land at index 3 or index 30, and does not bid for it. So the priority fee a transaction attaches is a revealed measure of how much the trade is worth to the trader beyond the trade itself, and that surplus is value the pool's liquidity providers are the counterparty to.

basefee`, the priority fee per unit of gas actually paid, and adds a surcharge along a saturating curve: surcharge(priority) = maxSurcharge * priority / (priority + halfPriority) At `priority == halfPriority` the swap pays half the cap. The surcharge is an LP fee, so it goes to in-range liquidity; the hook takes nothing and holds nothing. The trader cannot dodge it by bidding low, because bidding low is exactly the concession the hook is asking for: a searcher who drops their priority fee to avoid the surcharge loses the race that made the trade profitable.

That is the point. The hook prices the option to be early rather than trying to detect who is early. Prior art: fee mechanisms keyed on realized volatility, on price movement and on swap size are all well covered.

The idea that priority fees reveal flow toxicity is discussed in the ordering-fee literature and in Uniswap's own research on priority-ordering auctions, but the surcharge itself has been implemented at the sequencer or the router, never inside the pool where the liquidity providers who bear the cost can be paid directly. Chain support, stated plainly. This works where there is a real priority-fee market: Ethereum, Base, Unichain, Optimism, Blast and other OP-stack chains.

On Arbitrum One transactions are ordered first-come-first-served and the priority fee is normally zero, so on that chain the hook charges `baseFee` and nothing more. It is safe there, it is simply inert, and a pool on Arbitrum should use {ArbTaxDecayHook} instead.

Using it

Uniswap v4 removed hookData from initialize, so per-pool parameters arrive out of band. Fix them for a pool key whose pool does not exist yet, then initialize. Nobody can change them afterwards, including you.

hook.configure(
    key,
    PriorityFeeTaxHook.Config({
        baseFee: /* uint24 */ 0,
        maxSurcharge: /* uint24 */ 0,
        halfPriorityWei: /* uint128 */ 0
    })
);

poolManager.initialize(key, startingSqrtPriceX96);

The pool's fee field must be LPFeeLibrary.DYNAMIC_FEE_FLAG. The hook rejects a pool initialized without it, which is the most common integration failure.

Parameters

From TypeScript

npm i @hookforge/sdk

import {getHook, hookAddress, poolKeyFor} from "@hookforge/sdk";

const hook = getHook("priority-fee-tax");
const key  = poolKeyFor({
  hook: hookAddress("priority-fee-tax", 8453),   // Base
  currencyA: USDC, currencyB: WETH,
  tickSpacing: 60, dynamicFee: true,
});

What it reverts with

The callbacks it claims

Uniswap v4 reads a hook's permissions from the low fourteen bits of its own address, which is why deploying one means mining a CREATE2 salt. This hook claims 2, so every deployment of it has an address ending in 0x1080.

• beforeInitialize
• afterInitialize
• beforeAddLiquidity
• afterAddLiquidity
• beforeRemoveLiquidity
• afterRemoveLiquidity
• beforeSwap
• afterSwap
• beforeDonate
• afterDonate
• beforeSwapReturnsDelta
• afterSwapReturnsDelta
• afterAddLiquidityReturnsDelta
• afterRemoveLiquidityReturnsDelta

It says what it is, on-chain

Nothing about a hook's address tells an indexer, a wallet, a router or an agent what the pool does, which is why hook discovery today is a curated list. This hook answers for itself, in one eth_call, with no registry in the loop.

cast call $HOOK "hookName()(string)"    # PriorityFeeTax
cast call $HOOK "specURI()(string)"     # https://priority-fee-tax.pages.dev/hook.json
cast call $HOOK "hookTags()(string[])"  # mev, dynamic-fee, order-flow, oracle-free

Build, test and deploy

git clone --recurse-submodules https://github.com/nirholas/priority-fee-tax
cd priority-fee-tax
forge build && forge test

# Dry run: mines the salt, prints the address, sends nothing.
forge script script/Deploy.s.sol --rpc-url $RPC_URL

# For real.
forge script script/Deploy.s.sol --rpc-url $RPC_URL --broadcast --verify