Ethereum's EIP-1559 will be released in the next few days - what you need to know before using it

Ethereum's EIP-1559 will be released in the next few days: what you need to know before using it - 1 aECwXZs0zS7FcqlbNaU5ZQ 1024x538EIP-1559, or Ethereum Improvement Proposal 1559, is designed to improve the blockchain's commission mechanism. The new proposal will eliminate the auction as the main lever for calculating the price of gas. Currently, users offer a certain amount of money for their transactions to be processed by the Ethereum blockchain. The principle at play now can be simply described as “the more you pay, the faster the transaction you get”.

The new proposal completely changes the way transactions are processed on the network by adding a basic reward for miners that will allow users to have a more stable fee structure in the network and pay less for transactions. According to the blog section, the current fee structure causes huge overpayments due to the inability to transact quickly without paying 3 times more than the average fee.

What will happen when the network is subjected to a high load?

As mentioned in the FAQ, the base rate will increase as in the current rate structure. But the main difference will be that after the EIP-1559 update, we won't see a 5-8x increase in gas prices, as we saw during periods of high network congestion in May thanks to the base rate. In the new fee structure, “tips” will be presented that will act as a reward for miners for passing specific transactions if the network is congested.

Can miners push the transaction fee too high?

In theory, yes. Some miners will be able to ignore transactions that don't include a certain amount of tipping. If so, they may lose money by not receiving the base commission, but will receive further gains from high tips. However, such a strategy is not in favor of the miners. Since most transactions that do not include tips will be missing, they will increase the income of other miners by giving away the chance to receive money from commissions.

How could hardfork affect the price of Ethereum?

There is no sure answer to this question. On the one hand, implementing the base rate will mean more ETH will be burned over time. But on the other hand, miners will receive fewer rewards, which makes Ethereum's future questionable.

But we can't deny the deflationary effect discussed by the developers in the FAQ which might pump the quotation of the currency due to a gradual decline in supply through the burning of commissions. The hardfork will most likely take place on August 5th. Currently, the price of Ethereum is not reacting in any way to the news and is just following the general sentiment of the market.