The cost to use Ethereum has increased some 500% since April. That’s not very helpful for people running programs on it.
And while average gas fees are not at the all-time highs seen in July 2018, the problem will need fixing if decentralized applications (dapps) can be run reliably on the world’s leading smart-contract blockchain.
Called Ethereum Improvement Proposal (EIP) 1559, this proposed update aims to reduce transaction costs by overhauling the network’s fee market in what independent analyst describes as “the biggest change to any blockchain post-release.”
Some Ethereum clients, the teams that maintain the blockchain’s software in various programming languages, are already working on implementations.
EIP 1559
Introduced in April 2019, EIP 1559 has roots going back to an August 2018 paper on Ethereum’s price-auction model penned by Ethereum co-founder Vitalik Buterin. The EIP itself was co-authored by Buterin, in addition to Ethereum developers Eric Conner, Rick Dudley, Matthew Slipper and Ian Norden.
EIP 1559 tries to solve fee pressure by implementing “algorithmic price discovery,” according to Ethereum Foundation researcher Barnabé Monnot in a technical deep dive.
The EIP solves two problems at once by dynamically changing the size of blocks depending on the number of transactions in the queue between certain thresholds and by pricing out certain users when demand gets too high.
This is accomplished in two parts: a burnt base fee (BASEFEE) for transacting and a tip to miners.
The base fee will reside at a set level, depending on network conditions, while the tip compensates miners for their work and can be increased to “skip” the transaction line – a nice feature of current blockchain networks that helps alleviate congestion.
Think of it like a regulated highway that can open and close lanes as needed. Plus, there’s a fast-pass lane someone can pay for if they need to scoot in an emergency.