What is EIP-1559?
In short, it is a proposal which lays out a new way users bid for blockspace in Ethereum.
A summary 👇
In short, it is a proposal which lays out a new way users bid for blockspace in Ethereum.
A summary 👇
1/
For those new to crypto, like me, EIP-1559 stands for "Ethereum Improvement Proposal #1559"
For those new to crypto, like me, EIP-1559 stands for "Ethereum Improvement Proposal #1559"
2/
Benefits of EIP-1559:
1. Better UX by making fee estimation easier
2. Elastic block size, with limit on long-term average block size
3. Better security
4. Ensures $ETH preserves its monetary premium
Benefits of EIP-1559:
1. Better UX by making fee estimation easier
2. Elastic block size, with limit on long-term average block size
3. Better security
4. Ensures $ETH preserves its monetary premium
3/ Better UX
Introduce BASEFEE: a minimum fee commanded and burnt by the protocol. The idea is that this will make fee estimation easier.
So... how're miners incentivized?
Introduce BASEFEE: a minimum fee commanded and burnt by the protocol. The idea is that this will make fee estimation easier.
So... how're miners incentivized?
4/ Better UX
When users submit transactions, they indicate:
1. Tip: a bid for transaction inclusion - in normal times, this is low; in peak traffic, tip acts like the current first-price auction
2. Fee cap: maximum they're willing to pay
When users submit transactions, they indicate:
1. Tip: a bid for transaction inclusion - in normal times, this is low; in peak traffic, tip acts like the current first-price auction
2. Fee cap: maximum they're willing to pay
5/ Elastic block size
By creating a cost to transaction inclusion - burning BASEFEE. Miners will only make larger blocks if people are willing to pay. BASEFEE burn also discourages miners from filling their blocks with garbage.
By creating a cost to transaction inclusion - burning BASEFEE. Miners will only make larger blocks if people are willing to pay. BASEFEE burn also discourages miners from filling their blocks with garbage.
6/ Elastic block size
EIP-1559 replaces the existing hard cap on block size with
1. a long-term target of 10m gas per block
2. new hard ceiling of 20m gas per block
EIP-1559 replaces the existing hard cap on block size with
1. a long-term target of 10m gas per block
2. new hard ceiling of 20m gas per block
7/ Elastic block size
BASEFEE adjusts with gas per block.
When under/over 10m gas, BASEFEE is lowered/raised to encourage/discourage demand.
BASEFEE adjustment is capped at 12.5% in each direction per block.
Close to 20m gas cap, users revert to tip auctions (current method).
BASEFEE adjusts with gas per block.
When under/over 10m gas, BASEFEE is lowered/raised to encourage/discourage demand.
BASEFEE adjustment is capped at 12.5% in each direction per block.
Close to 20m gas cap, users revert to tip auctions (current method).
8/ Better security
EIP-1559 proposes that transaction fees get burned, and miners get incentivized by a more reliable perpetual block subsidy. Doing so improves security because now the network security is not linked to transaction fees.
EIP-1559 proposes that transaction fees get burned, and miners get incentivized by a more reliable perpetual block subsidy. Doing so improves security because now the network security is not linked to transaction fees.
9/ Retain $ETH's economic value
If we burn $ETH to transact, we preserve its monetary premium.
If we burn $ETH to transact, we preserve its monetary premium.
10/ Challenges
When BASEFEE near zero (no burn), miners are incentivized to keep fees near zero forever because they get the full tip. They can do this by never mining a block above 10m gas.
When BASEFEE near zero (no burn), miners are incentivized to keep fees near zero forever because they get the full tip. They can do this by never mining a block above 10m gas.
11/ Mitigant
Dominant strategy for the group does not equal dominant strategy for the individual. As long as there is demand to transact for higher gas, all it takes is one miner to break the coalition.
Dominant strategy for the group does not equal dominant strategy for the individual. As long as there is demand to transact for higher gas, all it takes is one miner to break the coalition.
12/ Mitigant
Furthermore, a Miner-Activated Soft Fork (MASF) is not an EIP-1559 specific attack. It exists on any network, always.
Furthermore, a Miner-Activated Soft Fork (MASF) is not an EIP-1559 specific attack. It exists on any network, always.
13/ Summary
EIP-1559 improves predictability of fee estimation, except for brief periods of high traffic where the network reverts to relying on first-price auction mechanism. BASEFEE mechanism should minimize the length of these periods.
EIP-1559 improves predictability of fee estimation, except for brief periods of high traffic where the network reverts to relying on first-price auction mechanism. BASEFEE mechanism should minimize the length of these periods.
Source: insights.deribit.com/market-researc…
Extremely detailed piece by @hasufl and @gakonst , I'd recommend reading. I tried to make my thread as simple as possible, so it misses many details.
Extremely detailed piece by @hasufl and @gakonst , I'd recommend reading. I tried to make my thread as simple as possible, so it misses many details.
Was motivated to understand EIP-1559 after seeing @transmissions11 's tweet
https://twitter.com/transmissions11/status/1363931068873646080?s=20
• • •
Missing some Tweet in this thread? You can try to
force a refresh
