The Ethereum (ETH) community has been buzzing with excitement over the implementation of EIP-1559 and its revolutionary ETH burning mechanism. Péter Szilágyi, a prominent ETH developer, has hailed this upgrade as “the great equalizer” that levels the playing field between validators and regular users. In this article, we will delve into the positive impacts of EIP-1559 on the Ethereum network and its users.
A Fairer Gas Fee Bidding System
One of the major changes brought about by EIP-1559 is the introduction of the “base fee” for gas fees. This base fee is either burned or sent to an irretrievable wallet, thereby reducing the overall supply of ETH. Ultrasound Money’s data shows that over 3.9 million ETH have been burned since the implementation of EIP-1559. On a weekly basis, more than 21,100 ETH are automatically taken out of circulation, effectively “burning” ETH’s supply.
Szilágyi highlights the advantage that regular users now have with EIP-1559 in comparison to validators. Previously, validators (formerly miners) had the power to adjust gas limits and transaction fees at their discretion, creating an imbalance in competition for regular users. However, with the implementation of EIP-1559, all participants, regardless of their status, must adhere to the same rules and guidelines.
One of the most significant benefits of EIP-1559 is the improved user experience when it comes to predicting transaction costs. Prior to this upgrade, users had to contend with unpredictable and sometimes exorbitant gas fees, especially during periods of network congestion. With the base fee adjustment set at the protocol level, senders can now have a clearer understanding of the fees they will incur for their transactions.
A Stabilized Network
Although Szilágyi initially considered EIP-1559 to be a “bad idea,” he acknowledges that it has played a crucial role in stabilizing the Ethereum network. By burning ETH and gradually making it deflationary, EIP-1559 has contributed to reducing inflation within the Ethereum ecosystem. As a result, the network has become more resilient and less susceptible to extreme price fluctuations.
One of the key long-term implications of ETH burning is the potential impact on prices. Unlike Bitcoin, Ethereum does not have a capped total supply, making inflation a concern. However, by reducing the overall supply through burning, EIP-1559 has the potential to mitigate inflationary pressures and create a more favorable environment for price appreciation. While short to medium-term price upsides may be limited, the long-term outlook appears promising.
The implementation of EIP-1559 has marked a significant milestone in the development of Ethereum. Beyond the fairer gas fee bidding system, this upgrade has brought about numerous positive impacts for users. From leveling the playing field between validators and regular users to providing a more predictable user experience and stabilizing the Ethereum network, EIP-1559 has proven to be a game-changer. As the Ethereum community continues to embrace and refine this upgrade, we can expect further advancements and improvements in the ecosystem.
Disclaimer: The content of this article is for educational purposes only and should not be interpreted as financial advice. Investing in cryptocurrencies carries risks, and readers are advised to conduct their own research and consult with a professional financial advisor before making any investment decisions.