Some things captivate the Cryptoverse’s attention for months on end, whether they deserve it or not. The widely anticipated Ethereum Improvement Proposal, or EIP, 1559, will bring significant change to Ethereum (ETH) and has been a focus of discussion since last year.
With EIP-1559 rapidly coming, it’s a good opportunity to review what it is, what it will accomplish – but also what it will not do, despite what some ETH supporters believe.
When and what it is
EIP-1559, which was first suggested in April 2019, is a plan to radically reform Ethereum’s monetary system, particularly by introducing an automatic token burn mechanism for each transaction. It is also intended to aid in the improvement of the fee market.
In August 2020, Anthony Sassano, Founder of the Ethereum-focused Daily Gwei newsletter, called it “the largest and most complex improvement to Ethereum since it initially went online.”
It will be included in the London upgrade on August 5, at block 12,965,000, along with four other EIPs: two of which are related to EIP-1559, one that will lay the groundwork for broader Ethereum Virtual Machine (EVM) improvements, and one that pushes back the difficulty bomb, aka the ice age, that will make Ethereum impossible to mine, to December 1.
In late June, developers began testing the London upgrade on the Ropsten testnet. Adam Cochran, an Ethereum evangelist and former DuckDuckGo technology director, termed this “huge news for Ethereum, one of the largest updates in years and important for our future.”
According to ethernodes.org data, 66 percent of clients are ready for the upgrade as of the time of writing on Tuesday.
This specific EIP has received a lot of attention from the ETH community and the Cryptoverse in general, and it appears that many people are excited about it. Not all, though, as a handful of miners argued that lowering fees may threaten the security of the Ethereum network. This past spring, they attempted a “educational show of force” by requesting that 51 percent of Ethereum’s hashpower be transferred to the Ethermine pool for 51 hours. They were unable to succeed.
Whether the group was serious about increasing the hashrate or just trying to draw attention to create a discussion, Ethereum developers hastened their plans to migrate to the proof-of-stake-based Ethereum 2.0, which would do away with mining entirely.
What it will accomplish
Currently, ETH senders must pay a gas price for each transaction, but the fee is ambiguous, unknown in advance, and there is a risk of overpaying.
EIP-1559 will do the following, according to Ethereum Foundation community manager Tim Beiko:
a portion of the transaction fees should be burned;
introduce a “base fee” in network blocks that will track the gas price the network accepts from transactions based on demand for blockspace, making it easier for wallets and users to estimate the proper price for their transactions;
Add a new transaction type that allows users to define the maximum charge and miner tip they are prepared to pay, as well as receive a refund for the difference between that maximum and the base fee and miner tip.
In other words, it will divide the gas fees into a tip that can be specified by the sender of a transaction and a base price that is burned. Essentially, most gas taxes will be eliminated.
Furthermore, according to Tim Roughgarden, an American computer scientist and Columbia University Professor of Computer Science, EIP-1559 should do the following:
Through the flexibility of variable-size blocks, we can reduce the volatility in transaction costs and the delays that some users encounter.
Outside of instances of rapidly increasing demand, improve the user experience by providing easy charge estimation in the form of a “evident optimal bid.”
through the burning of transaction fees, at least modestly reduce the rate of ETH inflation
Alternatively, as Sassano and Nader put it, the EIP will:
allow for more accurate transaction fee estimation;
establish a symbiotic relationship between ETH, the Ethereum network, and its users
enable for more consistent transaction inclusion
“Following the implementation of EIP-1559, a transaction will be lawful only if the Max Fee is more than the Base Fee plus the Priority Fee. Any surplus funds are returned to the user “the authors stated “As a result, when submitting a transaction, customers will have much more certainty because they simply need to include enough to pay the Base Fee and a tiny Priority Fee to have their transaction included.”