Tucao Jun Roast Boy | EIP-1559: Little harm, great insult

To say that the most controversial topic in the blockchain field recently is probably the Ethereum’s EIP-1559 transaction fee reform proposal.

The general meaning of EIP-1559 is to allow the block to become larger temporarily (slack mechanism), introduce the base fee (Base Fee) adjusted with the usage rate of the block, and forcefully destroy this part of the fee from the handling fee of each transaction, The remaining transaction fee is the tip (Tip) paid to the miners. The details of the proposal will not be repeated here, please refer to the EIP-1559 proposalhttps://github.com/ethereum/EIPs/blob/master/EIPS/eip-1559.mdand other discussion articleshttps://www.chainnews.com/articles/963109267774.htm。

The design goals declared by EIP-1559 mainly include the following:

l It is convenient for users (wallets) to set Gas Price for transactions;

l Allow the block size to change elastically with the demand to alleviate the congestion problem;

l As a deflationary factor, balance the inflation caused by the continuous issuance of block rewards;

l To maintain the status of ETH, transaction fees must be paid in ETH instead of other methods;

l Reduce the risk of miners manipulating the order of transactions for profit (so-called MEV);

l Eliminate the incentive for miners to manipulate (raise) transaction fees.

Bazai believes that EIP-1559 is not very useful for achieving the above-mentioned goals on the surface, but it implements the development direction of Ethereum's future full shift to PoS, which can be said to be "little harm, but a strong insult" to ETH miners.

First of all, EIP-1559 does not have functions that facilitate users to predict Gas Price and alleviate congestion problems, but there are prerequisites for these functions to work. The premise is that the transactions on Ethereum are not too congested—that is, the overall throughput of Ethereum is sufficient, but the short-term peak processing capacity needs to be improved, so that expanding the block can indeed reduce the transaction delay at the peak time, and can also avoid users. Set the "too high" Gas Price according to peak conditions.

But a basic reality is that the throughput of Ethereum is not enough, and congestion is the norm. There are transactions equivalent to three hours of throughput queued in the transaction pool for a long time. With the development of applications such as DeFi, even if Ethereum operates at twice the current throughput, it will still be blocked. In the case of general congestion, the meaning of Gas Price is to compete with other users for the priority of packaging. Everyone subtracts a fixed rate, except for eliminating the transaction demand that cannot afford this fee in advance. "Involved" competition becomes easier or cheaper.

Second, the claim that EIP-1559 helps maintain block rewards for increased security is to solve a problem that doesn't exist. Because whether to continue to issue block rewards mainly depends on the attitude of the entire system design towards inflation/deflation, and the priority is higher than the specific distribution method, so in the long run, adding a deflation factor to EIP-1559 will not affect the nature of the system.

Again, the so-called function of reducing miners’ manipulation of transaction order and transaction fees is not possible through EIP-1559. At most, by increasing transaction costs and reducing the number of transactions, the method of "killing the enemy by eight hundred and harming oneself by one thousand" indirectly reduces the space for miners to operate.

The last point of "maintaining the status of ETH" is the goal that EIP-1559 can achieve without compromise, which is to force users to use ETH to pay transaction fees and increase the use value of ETH. As for the actual tip paid to the miners, it can still be paid in ways other than ETH as before.

Based on the above points, it can be said that the goal of EIP-1559 will not bring about any actual improvement except to help ETH "upgrade its status". Perhaps it can also suppress the demand for transactions by increasing transaction costs, making Ethereum look a little less congested.

So why is there still a lot of voices supporting EIP-1559? Except for a small number of people who have not figured out the effect of this proposal, the rest may have to analyze the motivation from whether it benefits or not.

For users, it is definitely not a disadvantage. EIP-1559 adds the option for users to actively set Gas Price and Tip. Users can at least adopt the same strategy as before. Setting Tip and Gas Price to be the same will not be more expensive than before. On the other hand, users who hold a large number of ETH can also benefit from the deflation caused by EIP-1559.

For developers, whether they are core developers or ecosystem developers, adapting to EIP-1559 is nothing more than adding a few lines of code without affecting program operation and user experience.

For miners, EIP-1559 is a tax added out of thin air, which will inevitably greatly reduce the miners' income from transaction fees (there are already many articles for detailed analysis, such ashttps://www.chainnews.com/articles/221116956384.htm). The reason for Spark Mining Pool’s opposition is very clear: “EIP-1559 is a redistribution of wealth from miners to holders, and it is a robbery of miners.”

We might as well do a rough qualitative analysis (regardless of network and calculation delay): in the case of sufficient transactions, as long as the Base Fee does not exceed 4 times the reward that miners can get (assuming Tip = Gas Price, this is Base Fee ≤ Gas Price * 80%), it is cost-effective for miners to package blocks twice the size - at this time, according to the EIP-1559 rule, the Base Fee will be increased by 1/8, and miners will lose half of the reward for each transaction, while turning over Times the number of transactions just make up for this loss. Therefore, in the case of long-term congestion in Ethereum, more than 80% of transaction fees will be directly burned. Miners blood loss! A world where only miners get hurt has been reached!

The rules of EIP-1559 actually put miners into a "prisoner's dilemma" in game theory. Each miner's behavior of maximizing his own mining income will raise the Base Fee and damage the interests of all miners. In the real world, the prisoner's dilemma of this repeated game will prompt the participants to unite, control the Base Fee in the form of a monopoly alliance (cartel), and even deliberately do not refer to the blocks dug by miners outside the alliance that increase the Base Fee. If miners really establish such a monopoly alliance, it will definitely be very detrimental to the long-term development of Ethereum.

Bazai believes that in the proof-of-work system, miner rewards are actually the fees paid by miners for the security services provided by blockchain ledgers, which should be shared by all beneficiaries. The beneficiaries of a blockchain system include all users who hold assets on the chain, because the value provided by miners is not just packaged transactions. The relationship between users and miners here is a bit like "owners" and "security guards" hired by them, and the additional block rewards are to collect "inflation tax" from all users to pay miners.

If it is considered that the security of the system is sufficient for the assets carried on it, it is understandable to appropriately reduce the wages paid to "security guards". It is not new to directly cut miner rewards in history: Bitcoin block rewards have been halved many times, but as the currency price rises, the actual mining revenue and security increase instead of falling; Ethereum has cut several The next block reward, from 5 ETH per block first to 3 ETH and then to the current 2 ETH, has not seen the quarrel like it is today. Be sincere and tell the miners to reduce production, to save time, and to avoid wasting everyone's brain cells by making less detours.

Originally, miners are emotionless money-making machines. Even if the rewards are reduced, some miners will be driven away. As long as Ethereum does not fail, the remaining miners will continue to mine obediently. So supporters of EIP-1559 are not worried about miners forking Ethereum at all. Considering that the route of Ethereum's full shift to PoS has never wavered, the current batch of PoW miners will be abandoned sooner or later, and there is no need to care about their feelings. God V has spoken, "If some miners leave, new ones can come. If the miners attack 51%, we will all move to PoS as soon as possible."

However, the EIP-1559 proposal made a big circle, listing a bunch of high-sounding reasons, claiming to improve user experience, but actually cutting miners’ income to enhance the status of ETH, which is simply a model of peddling dog meat. Bazai thinks that instead of taking advantage and saying "I'm doing this for your own good", it's better to be sincere and to respect everyone's IQ. As Biyin Pan Zhibiao said: PoW miners have a very low status in the ETH ecosystem, and 1559 can be said to be "little harm, but a strong insult" to ETH miners.