The Ethereum 1559 update proposal, which will be merged with the London update in July, has created as much tension as fear and panic. Apparently, EIP-1559 is nothing more than a change in the structure of the Ethereum gas payment. To add to his excitement, it has also been classified as an Ethereum Deficiency Mechanism or Fire Mechanism, as it would destroy the Ether (ETH) used for transaction fees, making cryptocurrency deflation and possibly more valuable in the future.
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Reining in ether inflation will make digital assets deflationary like Bitcoin (BTC), which means that their purchasing power will grow over time. However, the relevance of the EIP-1559 proposal depends on the provision of unauthorized gas charging. An update has been under development for some time now, but the timing could not have been more appropriate. Ethereum’s high transaction fees are a result of the network being the most widely used blockchain in the world. This is partly due to the functionality of smart contracts, which is limited in the Bitcoin blockchain.
Ethereum jobs have used it as the backbone of many barriers in the sector. First there was the first coin offering, then decentralized financing, and now indestructible tokens. To better understand the importance of EIP-1559, we must take a step back and look at the current gas pricing model and why it should be changed in favor of the ecosystem, although this will give some miners a sour taste. mouth.
Transactions on Ethereum blockchain
Any activity that takes place on Ethereum is registered on the blockchain and the accompanying changes are considered a transaction. Each transaction has a cost that serves two purposes. First, transaction costs are designed to deter attackers from sending unwanted messages to the network. Second, it aims to stimulate miners operating the network by confirming transactions.
The Ethereum network currently uses an auction system to set gasoline prices. This basically means that there are no fixed transaction fees, and that the actual amount paid depends on factors, including network traffic. In theory, users who offer to pay more will be given priority and confirmed early. But as with any auction system, the price can actually go up. Ethereum’s transaction fees peaked at $ 39 for the first time in February.
This growth has benefited miners who, for obvious reasons, want to maintain the status quo. The EIP-1559 update is said to reduce transaction costs by up to 90%, but this can only be confirmed if and when it is enabled.
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For the wider Ethereum community, EIP-1559 is a welcome and perhaps long-delayed update.
More about the EIP-1559 update
The EIP-1559 update proposes to use flexible block sizes instead of fixed block sizes, which is common in proof of work systems. To do this, the EIP-1559 uses a two-step system with basic fees and gratuities.
The basic fee is paid in the air, and the rate will constantly change depending on the network load. The new proposal aims to keep network utilization at 50% or less. If the network utilization exceeds this limit, the basic fee also increases. This predictable pricing model aims to take the burden off by setting the prices of users and automatically transferring them to wallet providers. Once collected, the base fee will be burned, which means that miners will no longer be charged transaction fees. This will make ether a deflationary asset that supports the price over time.
Tips are slightly different from the norm in the sense that they are optional. And unlike the motherboard, which must be destroyed, miners keep the tip. In accordance with EIP-1559, blocks are not completely filled, which will allow miners to distribute transactions among users who will be willing to pay a premium to include their transactions in subsequent blocks. However, miners have no control over the fee structure and are dissatisfied with this proposal.
Miners do not like the EIP-1559 proposal
No one in life is ready to give up food – the same is true of Ethereum miners. In February alone, miners’ revenues hit a record $ 1.3 billion, half of which came from transaction fees. The miners opposed the EIP-155 proposal, as it is expected to cost them up to 50% of revenue. Things have come to the point that some of the collections threaten to unite as a sign of strength.