EIP1559

EIP-1559 is an Ethereum Improvement Proposal that reworks the network’s transaction pricing mechanism. Implemented as part of the London hard fork in 2021, it introduces a base fee per gas that is burned and a separate tip component paid to miners. The design aims to stabilize transaction fees, improve predictability for users, and reduce net issuance of Ether by burning part of the fees rather than distributing them to validators.

Mechanism: Each block carries a baseFeePerGas that is adjusted algorithmically after every block. The base fee moves up if the previous block’s gas usage was above the target and moves down if it was below. Transactions specify two fields: maxFeePerGas and maxPriorityFeePerGas. The actual fee components are the base fee (burned) and a priority fee (tip) paid to the miner, up to the user’s specified cap. The base fee is not received by miners; only the priority fee portion is awarded to them, while the base fee is burned, reducing supply over time.

Impact and considerations: The base fee burn creates a deflationary pressure that depends on network activity; during periods of high use, substantial Ether can be burned, potentially offsetting or exceeding new issuance. This changes the economics of using the network by shifting some value away from miners toward the burn mechanism. EIP-1559 improves fee predictability but does not address all scalability concerns, and it alters miners’ revenue streams, which has been a point of discussion among stakeholders. It also interacted with other Ethereum upgrades and continued to be complemented by additional scalability and incentive design changes.

History: The proposal originated from a group including Vitalik Buterin and was incorporated into the London hard fork, which activated on August 5–6, 2021. It has since become a foundational element of Ethereum’s fee market and monetary policy discussions.