The "London" upgrade is approaching, explaining the "can" and "can't" of EIP-1559 in detail

Author: Anthony Sassano & Nader

Since the Ethereum EIP-1559 proposal was first proposed in April 2019, there has been a lot of publicity in the Ethereum community. Now, with EIP-1559 slated to go live on the Ethereum mainnet during next week's Ethereum "London" upgrade, this article will provide an overview of the proposal and let readers know that it has many other benefits besides the well-known transaction fee burn. benefit.

Core benefits brought by EIP-1559

• Better Transaction Fee Estimates
• Create a symbiotic relationship between ETH, the Ethereum network and users
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Things EIP-1559 Cannot Do

• Doesn't lower Gas prices in the long run

• Does not make ETH deflationary by default

Before diving into EIP-1559 fully, it is worth clearing up some misconceptions. First, EIP-1559 will not make transactions on the Ethereum network cheaper in the long run. Gas prices fluctuate depending on the demand to submit transactions and the supply of available block space. This proposal would only smooth out the gas price by allowing the block size to increase slightly during sudden spikes in demand, but this would not improve the scalability of Ethereum, so it is not a solution to lower the gas price in the long run.

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Current Gas Price Auction

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Important changes introduced by EIP-1559

• Base fee, tip & maximum fee;
• variable block size
• Basic fee for destruction

1. Base fee, tip & maximum fee

• basic fee(Base Fee): The minimum Gas price that needs to be paid for the transaction to be included in the block. basic feeset by protocol, which is mutable, is part of the block header, and is part of the total fee paid by the userpriority fee。 
• priority feetiptip): That is, the gas price that users are willing to pay to miners in the form of "tips" in order for miners to process their own transactions. This isset by useris also part of the transaction, and this tippay miners(It is expected that by default this tip will be2 Gwei)。 
• maximum cost(Max Fee): The amount that the user is willing to pay for each unit of Gas transactionMaximum total gas price. This isset by the user, is also part of the transaction.

After the implementation of the EIP-1559 proposal, only when the user sets theThe maximum fee is greater than the sum of the base fee and the tiphour,transaction will be valid. The excess part will be refunded to the user, expressed in a formula:

Refund Amount = Maximum Fee - (Basic Fee + Tip)

In this way, users can have more certainty (that the transaction will be packaged) when submitting the transaction, because they only need to ensure that their transaction contains enough fees to payBasic fee and tip, so that your own transaction is packaged. Users no longer need to worry about overbidding gas prices, as excess gas is refunded to them instead of being paid to miners (or validators).

As new EIP-1559 transaction types are created,Wallets and other service/infrastructure providers will need to upgradeimage description

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Currently, the Ethereum block'sGas limit(gas limit) is 150 million Gas. You can think of this gas limit as Ethereum's block size, which limits the number of transactions that can fit 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 there is an upper limit on the size of the block.

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

To ensure 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 (Base Fee); and if it is greater than the target, Ethereum will increase the base feefee. It's also worth noting that in the latter case, the base fee actually increases very quickly: for each full block (i.e. the block size reaches the gas limit), the base fee for the next block will increase by 12.5%, This means that in the case of consecutive full blocks, the base fee will increase by 10 times at about 20 blocks (about 260 seconds) and 100 times at 40 blocks (about 520 seconds).

So, to summarize: thisvariable block sizeby permission agreementTemporary increase in available block spaceTo make the gas price more stable, so that the increase of gas price between blocks is more stable in the short term.

3. Destroy the base fee

At the same time as the tip is paid to the miner, the Base Fee will be burned and removed from circulation. The main reason for this is that if the base fee is paid to miners, they will be incentivized to make the base fee as high as possible to maximize their profits (and miners may also send high transaction fees to the network so that when they mine This fee can be recovered when the block is issued). By burning the base fee, this guarantees that miners will not pay attention to this fee.

Burning the base fee also makes ETH an inherent part of the Ethereum protocol. Currently, any cryptocurrency or even fiat currency can technically be used to pay for processing transactions on Ethereum. A user can submit a transaction with a transaction fee included, and agree with the miner to pay the transaction fee outside the Ethereum blockchain (which is what Flashbots does). With EIP-1559,Users must include a small amount of ETH as a base fee in the transaction in order for the transaction to be accepted as a valid transaction by the Ethereum networkSummarize

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As you can see, EIP-1559 will greatly enhance the user experience of processing transactions on Ethereum. Of course, most people like to focus on the fee burn aspect of EIP-1559, but the overall benefits of EIP-1559 far outweigh the fee burn and will have a positive impact on end users. If you still want to dive deeper into EIP-1559, you can check out these resources collected by Tim Beiko:

https://hackmd.io/@timbeiko/1559-resources