Ethereum London Upgrade: What is the Ethereum EIP-1559 that came into effect?

At 8 o’clock last night, the Ethereum mainnet completed the London hard fork upgrade at a block height of 12,965,000. This upgrade enabled the Ethereum EIP-1559 proposal to take effect, which also means that it is one step closer to PoW to PoS.

In the past year, in addition to BTC as always on the throne, DeFi has been a carnival hot spot throughout the year. While DeFi allows ETH to achieve value growth, it also makes its network increasingly congested and transaction costs increase, making it an “unbearable weight” of the Ethereum ecosystem.

How to reduce the ETH handling fee has become an urgent problem to be solved. In addition to solutions such as Layer 2, EIP-1559 has also attracted industry attention. So what exactly is EIP 1559 and what is it for? Let us find out!

1. What is EIP-1559? What’s the use?

Ethereum London Upgrade: What is the Ethereum EIP-1559 that came into effect?

The Ethereum improvement proposal EIP-1559 was proposed by Vitalik in 2019. He tweeted: In the current income structure of Ethereum miners, transaction fee income is close to half of the block reward, which may threaten the security of Ethereum.

At the same time, it is emphasized that “a proposal for the fee market (such as EIP 1559) can solve this problem.”

Ethereum London Upgrade: What is the Ethereum EIP-1559 that came into effect?

The purpose of EIP 1559 is to improve the efficiency of the Ethereum fee market , making transaction fees more predictable, and processing surge demand more efficiently, thereby capturing greater Ethereum value.

The content of the agreement mainly includes the following four points:

1. Let all transactions pay the same rate as much as possible to improve user experience.

Blockchain platforms such as Bitcoin and Ethereum use the first-price auction system (that is, a “sealed” auction, in which buyers do not bid in order, but bid at the same time as written bids). The highest bidder will Get the auction item at its bid level.)

In this way, in the bidding process, the bidders do not know the total number of people participating in the bidding and the price of the bid, which causes the bidders to pay a lot of money, so the cost estimation becomes a big problem.

EIP-1559 attempts to solve this problem by implementing the same fee rate as possible for all transactions. In most cases, users only need to decide whether to pay the fee, and no longer decide how much to bid. As the cost estimate is more accurate, the handling fee is expected to be reduced.

2. Implement a flexible block size restriction mechanism to balance the use of block space.

Faced with a surge in transaction demand and in the case of large differences in block usage, as long as users pay, miners can allow certain blocks to expand, as long as other blocks are relatively small to achieve a long-term average block size limit.

3. Propose to use permanent block subsidies to incentivize miners and improve network security.

When the block subsidy is used up, the blockchain platform may encounter problems if it only relies on transaction fees to ensure security.

EIP-1559 attempts to separate transaction fees and network security , and use more reliable permanent block subsidies to incentivize miners. Change the original transaction fee to the basic transaction fee and tip setting, destroy the transaction fee, and give the tip to the miner.

4. It is stipulated that transactions must consume a certain amount of ETH, which increases the difficulty of economic abstraction.

Economic abstraction refers to the ability to use any kind of blockchain asset to pay for the commission of any blockchain transaction and the transaction operation itself.

EIP-1559 stipulates that transactions must consume a certain amount of ETH, and hopes that this will increase the difficulty of economic abstraction.

Because when users can use any token to pay transaction fees, the reserve status and currency premium of the native token will be threatened.

2. How is the progress of EIP-1559?

Ethereum London Upgrade: What is the Ethereum EIP-1559 that came into effect?

At the beginning of 2020, the Protocol team of ConsenSys agreed to help promote the development of EIP-1559. The team stated that EIP-1559 is currently being carried out from four aspects: implementation, simulation, formal analysis, and community expansion.

And on January 6, 2021, EIP-1559 has been implemented in Filecoin main network and on-line every day because of network transactions FIL consumed about 100,000 to 150,000. Juan Benet, the founder of Filecoin, mentioned in his speech:

At least two key victories have been achieved by adopting this criterion:

1. Fast track for high-value transactions. As expected, the integration of EIP-1559 provides Filecoin participants with a direct mechanism to solve this congestion problem without always paying a high price.

2. Network capacity management. So far, the basic fee mechanism of EIP-1559 has done a good job of keeping the network capacity at 100% of its target.

And said that EIP-1559 has many eye-catching features, which are very consistent with Filecoin’s design considerations. However, due to the large difference in basic costs and the high rate of change, the key WindowPost messages are priced.

At 8 o’clock last night, the long-awaited Ethereum mainnet completed the London hard fork upgrade at a block height of 12,965,000, and EIP-1559 also took effect. This also began to allow the Ethereum network to dynamically adjust each transaction according to transaction needs and block size. The base fee of the transaction, and this part of the fee will be burned directly. Data shows that more than 3,300 Ethereum were burned within 13 hours of the completion of the London hard fork upgrade.

Ethereum London Upgrade: What is the Ethereum EIP-1559 that came into effect?

Data source: etherchain.org

Therefore, the transaction fees paid to miners are expected to be reduced, which also makes the consensus algorithm from a proof-of-work mechanism (PoW) to a proof-of-stake mechanism (PoS) a step further.

3. Summary

EIP-1559 breaks the current status quo that the charging market is not user-friendly, and at the same time captures the value of Ethereum network fees. David Hoffman called it “the last piece of the puzzle in Ethereum’s monetary policy” and was “a key part of ETH’s acquisition of a currency premium.”

However, it is difficult for EIP-1559 to fundamentally reduce the average handling fee, because the continued high handling fee is essentially a scalability issue rather than a mechanism design issue.

What value do you think the emergence of EIP-1559 will bring to Ethereum? Welcome to share your views in the message area.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/ethereum-london-upgrade-what-is-the-ethereum-eip-1559-that-came-into-effect/
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