Thread by @srinathariharan

"EIP-1559 mathematically guarantees that $ETH will hit $15,590. That is my high level understanding"

h/t @ricburton

With ETH breaking all time highs this week, understanding it has become an imperative

WTF is EIP-1559 mean for the average non technical user?

a thread 🧵

**Some context:**

Currently 90%+ of web3(NFT's, DAPP's etc) is all on the ETH ecosystem.

With more real world applications spawning everyday, transaction fees(also called gas fees) are becoming increasingly important

Currently the ETH ecosystem uses a simple auction system to determine transaction fees

Miners choose to process transactions with the highest bids

You pay more for a priority transaction

This system has quite a few problems and EIP-1559 solves all of them

h/t @VitalikButerin

Problem: the current system is slow

Currently there is a cap on the size of blocks that carry out transactions in the network - 12.5 million (also called gas limit).

This means that it takes multiple blocks to approve some transactions.

How EIP-1559 solves it:

EIP-1559 means the blocks on the network dynamically change size based on the number of pending transactions in the network.

The maximum size(gas limit) of a block will be doubled from 12.5 mill to 25 million.

TLDR: EIP-1559 means faster transactions

Problem: Ridiculous fees

The problem with any auction system is that its impossible to determine a base reference point of what the cost of a transaction is.

Currently it takes complex algorithms to estimate this

Still most people end up overpaying

How EIP-1559 solves it:

EIP-1559 introduces a base fee and an inclusion fee. The base fee is burned but the inclusion fee goes to the miners.

Some estimates say that fees could go down by as much as 70%

TLDR: EIP-1559 means less fees

Unintended consequences:

Burning base fees mean that eth becomes a deflationary currency.

the issuance rate of Ethereum stands at 4.5% per year

Post EIP-1559 the estimated issuance rate be 0.5 - 1%.

Many people in the ETH community like @ricburton and @garrytan have started using the bat and loudspeaker emoji to signify this ultrasound effect.

As base fees get burned and demand outstrips supply, ETH becomes truly ultrasound money

Miners take the fall:

Reduced fees means that mining becomes significantly less profitable. It does however make miner's income flow more predictable

Thread TLDR: EIP-1559 means

- Faster transactions
- Lower fees
- ETH ecosystem becomes deflationary
- Mining becomes less profitable but more predictable

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