Blockchain projects are the face of evolution. In a rapidly changing world, creators must ensure that all cogs fit well and there is no friction. From Ethereum’s end, the subject of most upgrades is around efficiency, security, and adoption. Efficiency talks revolves around end-user’s freedom while adoption is whether the network will soldier on and thrash competitors.
What EIP 1559 means?
And this is where EIP 1559 comes in. The improvement proposals arises because Ethereum, unlike Bitcoin or Litecoin, has a flexible minimum supply all which depends on several factors.
The EIP suggests a solution that will better allow the end user to manage their gas expenditure, a proposal that was put forth by Vitalik Buterin in his Blockchain Resource Pricing paper.
2/If EIP1559 gets implemented, it's a new era for $ETH as the current gas fee system we knew would be over.
— Dark Crypto Lady (@DarkCryptoLord) April 28, 2020
At core it seeks to replace the first-price auction model which governs the current fee market and instead proposes transaction inclusion effectively reforming the fee market. As such, there will be a mechanism in place that guarantees that a user’s transaction will be included in the next block thereby improving user experience.
Besides, there is a proposal to drop the Miner Gas Voting and fees that go to miners will be burned.
Benefits of EIP 1559 according to Vitalik Buterin
Vitalik Buterin, in a post, has now clarified, noting down three major benefits of the EIP. They include:
- Mitigating the instability issues in fee-only blockchains like Ethereum. Vitalik points out that eventually, when network as Bitcoin will be sustained by fees only, its blockchain—studies reveal, tend to be unstable consequently incentivizing “selfish mining attack vectors.”
- Introduces a fixed price sale subsequently eliminating the first price auction inefficiencies and making fee estimation extremely Vitalik notes that there is inefficiency since the “difference between average gas price and 10th percentile gas price in a regular block is something like 3x for median and 5-8x for mean.” Because of this “people needlessly overpay massively” when they have to post their fees in their transaction allowing miners to choose which transactions to confirm and which not to.
- The mitigation of economic inefficiencies due to fee volatility. This is so because in the short term, the adjusting fee model will intuitively introduce a fixed fee in the short term but a cap in the long run. EIP 1559 will effectively reduce the mismatch between volatility of the transaction fee levels (which can spike from 2 to 20-50 GWei depending on usage) and the social costs of transactions.
Critics have their reservations
Still, there are weakness that this EIP tags along like the possibility of overloading nodes and miners when network activity spikes. Critics of this EIP add that there is no need of dropping miner gas voting as it is dangerous. During high activity periods, transaction fees may end up being inflated artificially (just to burn them).
This might end up exposing the network especially when ETH prices fall as funding security is low. Moreover, there is a real possibility of dis-incentivizing miners and thereby unintentionally increasing transaction time
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Dalmas is a very active cryptocurrency content creator and highly regarded technical analyst. He’s passionate about blockchain technology and the futuristic potential of cryptocurrencies and enjoys the opportunity to help educate bitcoin enthusiasts through his writing insights and coin price chart analysis. Follow him at @dalmas_ngetich