The “Can” and “Cannot” of EIP-1559

Since the Ethereum EIP-1559 proposal was first proposed in April 2019, the Ethereum community has carried out a lot of publicity on it. Now, as EIP-1559 plans to launch the Ethereum mainnet during the Ethereum “London” upgrade next week, this article will outline this proposal, and let readers know that this proposal will bring many other things besides the well-known transaction fee destruction. benefit.

The core benefits of EIP-1559

  1. Better transaction fee estimation
  2. Create a symbiotic relationship between ETH, the Ethereum network and users
  3. Allow more reliable transaction packaging

Things that EIP-1559 can’t do

  1. In the long run, gas prices cannot be reduced
  2. Doesn’t make ETH deflationary by default

Before fully delving into EIP-1559, it is necessary to clarify some misunderstandings. First of all, in the long run, EIP-1559 will not make the transaction cost of the Ethereum network lower . The fluctuation of Gas price depends on the demand for submitted transactions and the supply of available block space . This proposal only makes the gas price more stable by allowing the block size to increase slightly in the event of a sudden surge in demand , but this does not improve the scalability of Ethereum, so it is not a solution to lower the gas price in the long run.

Second, even if a certain amount of ETH is destroyed for each transaction, it does not necessarily mean that enough ETH will be destroyed to offset its current issuance rate. If ETH is to become deflationary, a base fee of about 150 Gwei needs to be maintained to offset the additional issuance of the PoW Eth1 chain, and a basic fee of about 20 Gwei needs to be maintained to offset the current additional issuance of the PoS Eth2 chain.

Current Gas Price Auction

At present, the Ethereum network uses the ” highest price auction ” model to price transactions, which means that users with the highest gas price bids are most likely to have their transactions packaged by (miners) first. However, the biggest problem with this model is that if the demand for Ethereum’s limited block space suddenly increases, Gas prices may fluctuate sharply (because users will compete to bid higher Gas prices to make their transactions packaged. ). When users submit transactions, they often have to set transaction fees in a “gambling”-like manner, and often pay excessive fees to ensure that their transactions are packaged. Overall, EIP-1559 trying to change the way the estimated transaction costs and cope with a surge in the use of way network in order to provide a better user experience.

Important changes brought by EIP-1559

  1. Basic fee, tip & maximum fee;
  2. Variable block size
  3. Basic destruction fee

1. Basic fee, tip & maximum fee

  • The basic fee (Base Fee): in which trading is packaged into blocks required to pay the lowest price Gas. The basic fee is set by the protocol , it is variable , is part of the block header, and is the part of the total fee paid by the user that will be destroyed .
  • Priority costs (Priority Fee , ie tips ): the user in order to allow the miners to handle their own transactions willing Gas prices to “tip” approach paid to miners. This is set by the user as part of the transaction, and this tip is paid to the miner (it is expected that this tip will be 2 Gwei by default ).
  • Maximum fee (Max Fee): users are willing to pay for each unit of Gas Trading highest total Gas prices . This is set by the user and is also part of the transaction.

EIP-1559 after the implementation of the proposal, only when the user sets the maximum cost is greater than the sum of the basic fee and tip time , the transaction will be effective . The excess part will be returned to the user, and the formula is:

Refund amount = maximum fee-(basic fee + tip)

In this way, users can have more certainty (transactions will be packaged) when submitting transactions, because they only need to ensure that their transactions include enough fees to cover basic fees and tips to make their transactions Be packaged. Users no longer need to worry about over-bid Gas prices, because the excess Gas will be returned to them instead of paid to the miners (or verifiers).

As the new EIP-1559 transaction type is created, wallets and other service/infrastructure providers will need to be upgraded to support this transaction type. However, even after the implementation of the EIP-1559 proposal, the traditional transaction types are still valid, and the Ethereum network will treat the difference between the gas price of traditional transactions and the current “basic fee” as a “priority fee” payment. To the miners; but the disadvantage is that if the user overpays, the traditional transaction type will not provide a refund. The actual situation will be as shown in the figure below:

The "Can" and "Cannot" of EIP-1559

Above: Two transactions packed into the same block (the basic fee is 15 Gwei).

2. Variable block size

Currently, the gas limit of the Ethereum block is 150 million Gas. You can think of this Gas cap as the block size of Ethereum, which limits the number of transactions that can be accommodated in a single block. At present, whenever the transaction demand of the Ethereum network surges, the gas price will rise sharply, because the Ethereum block at this time is always full, and the block size has an upper limit.

EIP-1559 will make the block size can be temporarily increased to accommodate the sudden influx trading needs. This is achieved through two different block parameters: Gas upper limit and target Gas usage . The target gas usage is 50% of the upper gas limit , which means that if the target gas usage of a single block is 15 million gas, then the gas upper limit of the block will be 30 million gas. Ideally, the Ethereum network wants the size of each block to be close to the target gas usage (that is, the 50% gas limit).

In order to ensure that the block size stays close to the target gas usage, if the gas usage of the block is less than the target usage, Ethereum will reduce the base fee ; if it is greater than the target, Ethereum will increase the basic Fee . It is also worth noting that in the latter case, the basic fee actually grows very fast: for each full block (that is, the block size reaches the upper limit of Gas), the basic fee of the next block will increase by 12.5%, This means that in the case of continuous full blocks, the basic fee will increase by 10 times in about 20 blocks (about 260 seconds) and 100 times in 40 blocks (about 520 seconds).

Therefore, to summarize: this variable block size makes the gas price more stable by allowing the agreement to temporarily increase the available block space , making the gas price increase between blocks more stable in the short term.

The "Can" and "Cannot" of EIP-1559

3. Basic destruction fee

While paying the tip to the miner, the base fee will be destroyed and removed from circulation. The main reason for this is that if the basic fee is paid to the miners, they will be incentivized to make the basic fee as high as possible to maximize their profits (and the miners may also send high transaction fees to the network so that when they mine This fee can be recovered at the time of the block). By destroying the basic fee, this ensures that miners will not pay attention to this fee.

The basic burn fee also makes ETH an inherent part of the Ethereum protocol. At present, technically speaking, any cryptocurrency or even legal currency can be used to pay for processing transactions on Ethereum. Users can submit a transaction with transaction fees included, and settle the transaction fees with miners outside the Ethereum blockchain (this is what Flashbots does). With EIP-1559, users must include a small amount of ETH as a basic fee in the transaction to make the transaction accepted by the Ethereum network as a valid transaction , thereby creating a healthier relationship between the ETH asset and the Ethereum network. relation.


As you can see, EIP-1559 will greatly enhance the user experience of processing transactions on Ethereum. Of course, most people like to pay attention to the cost destruction of EIP-1559, but the overall benefits of EIP-1559 far exceed cost destruction, which will have a positive impact on end users.

Written by: Anthony Sassano & Nader

Original link:

Posted by:CoinYuppie,Reprinted with attribution to:
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