What Exactly Does EIP-1559 Do?

EIP-1559 is one of the most anticipated upgrades included in Ethereum’s evolution toward Ethereum 2.0. Implemented in August 2021, EIP-1559 aims to improve the user experience of transacting on Ethereum by reforming how gas fees operate.

The Old Way of Gas Fees

In Ethereum’s original model, users bid gas prices for their transactions. During congested times, competition for scarce blockspace could drive gas prices up dramatically. Users overpaid for fast inclusion, resulting in volatility.

How EIP-1559 Changes Gas Fees

EIP-1559 introduces a “base fee” for block inclusion that is programmatically calculated based on network demand. Users also add a optional “priority fee” for faster inclusion. Any excess fees get “burned” instead of awarded to miners.

The base fee aims to smooth out spikes during high demand. Priority fees incentivize miners for swift confirmation without excessively overpaying.

The Benefits of EIP-1559

  • Less volatile gas fees
  • Better user experience
  • Increased network predictability
  • Reduced overpayment and miner profits
  • Deflation from burning excess fees

While not a complete solution, EIP-1559 makes transacting Ether more affordable and accessible.