What is EIP-1559? How Did It Change Ethereum?


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The EIP-1559 implementation date was a hot topic in the Ethereum ecosystem a year ago. When does EIP 1559 go live? What does EIP-1559 mean? Every crypto enthusiast, especially those invested in the Ethereum ecosystem, was eager for answers. 

Finally, the EIP-1559 status is fully active. We have had months to analyze the effects of the changes on the network. This article details some of the changes introduced into the Ethereum ecosystem by EIP-1559. This blog explains how this new improvement has effectively provided solutions to some of the concerns in the network. 

Introducing EIP 1559?

The Ethereum Improvement Proposal (EIP-1559) is part of the influential London Hardfork Protocol. These are a group of five proposals by Ethereum’s core development team. 

The major reason behind this proposal was: to improve the mining speed of Ether and set it on a path toward becoming a deflationary asset. So when was EIP-1559 implemented? On August 5, 2021, it launched on the mainnet. Explaining the implementation of EIP-1559 is important because it introduced changes to Ethereum’s monetary policy and the burning of part of the transaction fee. 

Before the upgrade, Ethereum used an auction model. Transactions on the blockchain attract a fee, popularly called gas price. Miners then select the transactions with the highest bid prices to process and document on the blockchain. Unfortunately, the system is flawed because it favors the big whales who could afford to pay the big bucks for transactions. Also, there is extreme volatility in the gas fees, especially when the network becomes congested. 

How has EIP-1559 helped fix this system?

EIP-1559 has removed the simple legacy auction mechanism to calculate the transaction fees. Here, as soon as a user initiates a new transaction, a base fee is charged. It also introduced a new priority fee called tips to speed up transaction processing. User Experience has improved with these changes. 

Ether is a deflationary asset because it has no hard cap, unlike Bitcoin, which has a maximum limit of 21 million coins. Therefore, in a bid to increase the intrinsic value of Ether, the burning of the base transaction fee was adopted in EIP-1559.

Changes Introduced to the ecosystem by EIP-1559

Major changes introduced in the ecosystem by EIP-1559 are as follows:

Made transaction fee estimation easier

One of the flaws of the Ethereum network and, by extension, other DeFi and dApp projects built upon it is the erratic behavior of gas fees. Often, users overpay to get their transactions over the line quicker. 

The London hardfork solved this. With the introduction of the base transaction fee in EIP-1559 and its algorithmic adjustment to market congestion, estimation of fees is now easier, which has caused significant improvement in user experience. 

Reduced the intra-block difference in gas price

Before EIP-1559, transaction fees were calculated by a first-price auction mechanism. Miners then pick the transactions with the highest bids to include in the next chain. This act can cause a significant disproportion in the gas price paid by users on the same block. 

After EIP-1559 went live, it reduced the price disparity. Every transaction on the same block now commands a base transaction fee. Although users can pay a tip to hasten up the processing of their transaction, this doesn’t cause a significant intra-block gas difference.

Reduced users’ waiting time

Before implementing EIP-1559, users tend to have a longer waiting period. However, in a retrospective analysis by Coinbase, they reported an 11 seconds (or 0.7 blocks) improvement in broadcast-to-confirmation time. This is the time difference between legacy transactions and EIP-1559 transactions.

Effect on gas fee levels

In large data analysis, we observed that EIP-1559 did not lower the transaction fee directly. Granted, it has enabled easier fee estimation and prevented users from overpaying. However, high gas fees persist, especially for gas-intensive transactions like NFT minting. 

Therefore, it is safe to conclude that the high gas fee is due to the large scale of the network and not just a problem of the mechanism being employed. This is projected to be addressed when the network switches to a Proof of Stake model.

Blockchain security

Security is a critical part of any monetary system. The development team explained that EIP-1559 would improve the already great security of Ethereum. EIP-1559 makes it expensive to attack the system. However, before the launch, users were also concerned that the code change could bring potential dangers to the network. 

Months after its successful implementation, the Ethereum blockchain has remained strong as ever. With no potentially new hazards introduced by the changes. This has reinforced the trust of community members in the network.

Effect on Ether deflation

Burning part of the base transaction fee was a move to checkmate the deflationary status of Ethereum’s base cryptocurrency. Unfortunately, EIP- 1559 has not been able to deliver considerably on this mandate. 

In a report by Coinbase, 13,800 ETH was burned within two weeks. This averages to about 254 Ethers per day. This amount is not close enough to significantly improve the intrinsic value of Ether. Hopefully, the move to Proof of Stake will adequately address this.

The way forward, ETH 2.0

Although the merging of EIP 1559 has produced many positive changes in the Ethereum ecosystem. Concerns about the deflationary status of Ether persist. This is why Ethereum’s core development team is proposing another major change. The shift to Proof of Stake mining would address this and other issues. This shift is rumored to be slated for this summer.

To wrap up

EIP 1559 was a remarkable achievement by Ethereum. A diverse group of individuals came together to implement a complex change in one of the core mechanisms of a network as massive as this. This change brought about a massive improvement in user experience. Moreover, the seamless integration of these changes has reinforced the belief that decentralization is the future. 


What is the base fee for EIP 1559?

The base fee is the amount for adding the transaction to the next block by the miner. However, EIP 1559 employs an additional priority fee that goes to the miner, and the network burns the base fee.

Has EIP 1559 been implemented?

EIP 1559 is a hardfork of the Ethereum network to introduce changes in calculating the transaction fee. It has been implemented and effective since August 2021.

Why does EIP 1559 burn ETH?

EIP 1559 burns the base fee of the transaction that would offset the inflationary pressure on the ETH price. More transactions are added to the ETH network, and the proportion of ETH in circulation is burned.

How will EIP 1559 affect gas?

The EIP 1559 implementation has helped users estimate the gas fees that help them save the gas prices.


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