Will the implementation of EIP-1559 do more good than harm for Ethereum?

Recently, at the Ethereum core developer meeting, developers agreed to add EIP-1559 to the Ethereum London upgrade. In addition, at least 5 other EIPs will also be included in the Ethereum London upgrade, which is tentatively scheduled for July 2021. month execution.

In order to solve the current high gas fee problem, there are also constant meetings and discussions on Ethereum, and disputes arise from time to time. This dispute is quite similar to the fork of Bitcoin back then.

However, EIP-1559 will not be the final solution. Layer 2, Ethereum 2.0 and various EIP proposals can be paralleled to make Ethereum’s gas fees available to the public and allow more people to participate, so as not to make The public chooses other public chains because of the high cost of high-quality products. This is the question that needs to be considered today.

Seeing that BSC, HECO, FLOW and many other public chains are constantly diluting the traffic of Ethereum, and the disputes between users and miners continue, it is particularly important to initiate and pass every proposal during this difficult transition period.

However, the current approval of EIP-1559 is only a delaying measure. Today I will talk about the impact of this proposal based on the specific implementation of 1559.

What is EIP-1559?

Ethereum Improvement Proposal #1559 (EIP1559 for short) proposes a new on-chain fee pricing mechanism: change the original gas fee from "auction-style" pricing to "market exchange rate" The block capacity is pegged, and the gas fee will be split into a base fee and a miner fee.

The base fee will be dynamically adjusted according to the current usage of the network and will be directly destroyed. The basic logic is that when the usage rate of the Ethereum network exceeds 50%, the base fee will increase; when the network usage rate is lower than 50%, the base fee will decrease, and the base fee will fluctuate within a small range. In addition, the miner's fee still belongs to the miner who packaged the transaction information, and the pricing mechanism of the miner's fee remains unchanged, and the Gas Price and Gas Used are set by the user.

Next, let's take a look at the impact that EIP-1559 will bring:

(1) The destruction of the base fee reduces the circulation of ETH and endows ETH with a higher value. With the prosperity of transactions on the Ethereum network, the amount of destruction of the base fee will be greater than the amount of additional issuance, and ETH will move towards a deflationary mode, which increases the scarcity of ETH, thereby increasing the value of a single ETH.

(2) Change the pricing model of the Ethereum network Gas fee, and shift the dominance of transaction confirmation from miners to transaction creators. For a transaction on the Ethereum network, under the old gas fee pricing mechanism, miners can choose "high price" transactions, so that the transaction creator has to increase the gas fee, forming a vicious circle. EIP-1559 will alleviate this mechanism. The transaction creator can set the base fee according to the urgency of the transaction, which means that the dominance of transaction packaging will shift from miners to users, and the problem of network congestion will hopefully be alleviated.

(3) The transaction cost of the Ethereum network is expected to be greatly reduced.

In fact, these impacts are ultimately beneficial to the public participants, and for the miners, their interests have been touched, which led to conflicts before the implementation of EIP-1559 was confirmed.

Now that it is confirmed, there will be no particularly big changes in a short period of time. We still need to look forward to the implementation after July and the progress of Layer 2 and ETH 2.0. This is the key to our convenient use of decentralized applications.