The revolution of the commission system: understanding EIP-1559

A transformation in the price structure of Ethereum

The EIP-1559 upgrade, implemented during the London hard fork in August 2021, represented a fundamental change in how Ethereum manages transaction fees. This upgrade not only redesigned the gas pricing model but also introduced deflationary mechanisms that directly impact the supply of Ether. The innovation allowed the network to transition from a simple auction system to a more sophisticated and predictable one.

The problem that EIP-1559 aimed to solve

Previously, the network used a basic mechanism where users competed through auctions to have their transactions included in blocks. During periods of congestion, this resulted in unpredictable and often excessive fees. Users simply did not know how much they would actually pay until the transaction was processed.

The innovative mechanism behind EIP-1559

Dynamic base commission

EIP-1559 introduced a base fee that is automatically calculated based on the state of the network. When there is higher demand, the protocol increases this fee; when it decreases, it reduces it. This adaptive system smooths out volatility and makes costs more predictable for users.

Deflationary burn

The most disruptive element of EIP-1559 is that the base fee is permanently destroyed instead of going to the validators. This deflationary mechanism continuously reduces the total supply of Ether in circulation, potentially affecting long-term value.

Tips to speed up transactions

Users can add an optional priority fee on top of the base fee, incentivizing validators to process their transactions faster. This tip goes directly to the validator who includes the transaction in a block.

Practical impact for users and validators

For users, EIP-1559 provides greater certainty about costs and control over processing speed. For validators, although they lose the burned base fees, they continue to receive rewards through tips, keeping their economic incentives intact.

EIP-1559 demonstrated that blockchain protocols can evolve towards more efficient and equitable systems, balancing user experience with the economic sustainability of the network.