The Ethereum developers have the improvement proposal EIP 1559, which has been discussed for over a year, against the majority will of the mining community decided. It is to be integrated in July.

The implementation of the Ethereum Improvement Proposal (EIP) 1559 is considered the largest and most influential update of the blockchain in recent years. It aims to make the Ethereum network cheaper and faster by restructuring transaction fees. The regulation was decided in the course of the All-Core-Developers-Call on March 5, 2021 and should be included in the London update.

Uniform fee instead of auction principle

In the future, instead of the transaction fees set by miners independently, the so-called gas fees, there should be an algorithmically determined base fee, i.e. a base fee, which does not have to be auctioned for every transaction. We have explained the principle of gas fees in this article.

The calculated base fee should take into account the degree of utilization of the network and gradually increase or reduce. The block size in the network should also be changed dynamically in order to counteract blockages.

The base fee determined in this way is burned in the course of the transaction, i.e. destroyed by the protocol . Nobody benefits from these payments, which are always fixed to Ether due to the new regulation.

Miners receive “Tips”

So it is understandable that large parts of the miner community could not get used to the proposal because it would lose a very important financial incentive. The EIP 1559 still includes an incentive system, the so-called tip or “inclusion fee”.

In the future, users can receive an excess payment in addition to the base fee Offer the tip to prioritize the processing on the chain. Only these tips are given to the miners.

So they should by far not achieve their previous sales. In February alone, and transaction fees alone, they were around 723 million US dollars.

Nevertheless, there are also miners who are positive about the proposal stand. They take a sober view of the current problems of the Ethereum network and acknowledge that they must contribute to the solution in order to keep the network future-proof.

Users and developers fully support the proposal

On the side of the users and the Ethereum application developers, So the side that has to pay the transaction fees, EIP 1559 enjoys the greatest support. The world’s largest crypto administrator Grayscale Investments sees the proposal as an essential further development of the Ethereum network. Mainly because of the concept of burning the transaction fees and the associated shortage of the ether inventory, Grayscale predicts a strong upward trend for the ether price.

Mining is gradually becoming more difficult

Regardless of the resistance of the miners and mining pools EIP 1559 was ultimately agreed to be binding. Apparently the core developers fear countermeasures by the opposing miners, which is why they have also included EIP 3238 in the upcoming update for inclusion.

This is what it is the technical implementation of a “Difficulty Bomb”. This should gradually make mining on Ethereum more difficult. With the combination of the two proposals, the core developers want to achieve that a forking of Ethereum is at least only possible by overcoming technical obstacles.

MEV can partially compensate miners for loss of sales

Miners will use the new regulation eventually befriended. A replacement for lost transactions is already available anyway. With the so-called “Miner Extracted Value” (MEV), miners can use their influence in the compilation of blocks in order to place more profitable trades further up in the processing sequence.

MEV is already enjoying some popularity in the defibrillation area. Defi traders offer high fees to secure their place in the block. Ethereum mining pools will probably increasingly use MEV software in the future to develop this unused source of income.

By the way: The basic idea of ​​EIP 1559 works back to Vitalik Buterin, co-founder and inventor of Ethereum. In August 2018, he formulated a proposal (PDF) that concerns the fairer calculation of transaction fees on the blockchain, which is more in line with the actual effort.

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