An important step on the road to Ethereum 2.0, London’s EIP-1559 makes important changes in the way gas fees are calculated, and what is done with them.
The London hard fork has gone live on the Ethereum blockchain, bringing a major change to the way transaction fees are calculated, and to what is done with them.
The Ethereum upgrade’s most notable upgrade is Ethereum Improvement Proposal 1559. It takes gas fees away from the miners who currently verify transactions by adding new blocks to the No. 2 blockchain — something they opposed.
With EIP-1559, the gas fees charged for every transaction will be lower — though how much is debatable — and easier to estimate. By making it easier to predict gas fees, people will not have to pay higher fees just to ensure their transactions go through quickly on the clogged and expensive blockchain.
The gas fees paid to miners are now being burned, which proponents hope will lower the amount of ETH in circulation, creating deflationary pressure that should raise the price of Ethereum.
One way it does this is by setting a base fee.
“Under the current fee market, transactions on Ethereum often end up pending for a long time,” Ethereum developer Time Beiko wrote on HackMD. “Because blocks are always full, each new block is filled with the highest paying transactions since the last block. If a transaction is not immediately included (usually requiring a very high gas price), it is hard to estimate when it will be included.”
Under EIP-1559’s system, he said, “as long as a transaction is sent with a fee higher than the BASE FEE and includes a tip for the miner, it will be included in the next handful of blocks.”
The Road To Ethereum 2.0
The London hard fork is a significant step on the road to Ethereum 2.0, also known as Eth2.
Ethereum is in the process of doing away with miners altogether as it switches from the current proof-of-work consensus protocol to the far more scalable and environmentally friendly proof-of-stake powered Ethereum 2.0.
Calling it “one step along a long roadmap” to Eth2, Ethereum co-founder and ConsenSys CEO Joe Lubin told Bloomberg TV on August 4.
This step is the introduction of something that people are calling ‘ultrasound money’. Where the fixed amount of gold on the planet and the fixed supply of Bitcoin represent sound money to certain people, with $13 billion worth of Ether locked up in Ethereum 2 and $70 billion locked up in decentralized finance, we have enormous demand for the Ether token and now we’re burning the Ether token with the introduction of the London hard fork and EIP-1559.”
