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Ethereum’s London hard fork: What is EIP-1559?

imToken’s support of 1559 and the improvements the biggest change of this Ethereum upgrade brings

  • EIP1559 update #1: The perfect gas fee will be easier to guess
  • EIP1559 update #2: The mechanism burns ETH impacting the ETH price
  • Watch it burn at: ethburned.info and ultrasound.money

About EIP-1559

EIP-1559 will change Ethereum’s fee market, because it introduces a “base fee” for adding transactions to the network. The base fee will change the gas fee automatically based on market demand, which helps wallets and users to estimate transaction fees more easily.

imToken supports EIP-1559

After the Ethereum’s London hard fork, we already support gas fee estimation based on the rules of EIP-1559 in imToken.

Design Goals of EIP-1559

Better User Experience

Ethereum and Bitcoin currently both use a first price auction mechanism. This fee mechanism is simple but inefficient. The biggest problem is cost estimation. EIP-1559 attempts to solve this problem by making all transactions pay the same fee as possible. In most cases, the user only needs to decide whether to initiate a transaction, without having to consider how to set the fee.

Slack mechanism

Block space utilization often changes. While some blocks are almost empty others are full of transactions. The variable block size will vary with actual demand and improve speed slightly.

Better security

When — in the future — block rewards disappear, transaction fees alone will not be enough to motivate miners to maintain network security. By destroying transaction fees, EIP-1559 can extend the time for block rewards to incentivize miners without increasing the total supply, thereby ensuring the security of the network.

Prevent Economic Abstraction

In simple terms, only ETH is allowed to pay transaction fees. If users can use any token to pay transaction fees, it may threaten the reserve status of ETH. EIP-1559 alleviates this problem by forcing ETH as a fee token.

How EIP-1559 works

The old gas fee mechanism

  • Miner fee = GasPrice * GasUsed
  • GasUsed (gas): The total amount of gas consumed by the transaction
  • GasPrice (gwei): The price per unit of gas, 1 gwei = 10^(-9) eth
  • Using a bidding mechanism, the higher the GasPrice setting, the faster the transaction processing speed
  • The transaction is processed by the miner, and the gas fee is completely collected by the miner

The new gas fee mechanism

  • Transaction fee = (baseFee + PriorityFee) * GasUsed

baseFee (base fee)

baseFee will be automatically adjusted according to the space utilization of the previous block. If the utilization exceeds 50%, the baseFee of the current block will be increased; otherwise, it will be decreased.

  • If the space utilization rate of the previous block is 0%, the baseFee of the current block will automatically decrease by 12.5%

PriorityFee (tip)

PriorityFee is a tip for miners that still uses a bidding design. If you want your transactions to be packaged in the block as soon as possible, you can set PriorityFee to incentivize miners, and miners will give priority to processing transactions with high PriorityFee.

maxFee (maximum fee)

maxFee represents the highest transaction fee that a user is willing to pay for a transaction. Corresponding to the formula, maxFee = baseFee + maxPriorityFee, where both maxFee and maxPriorityFee can be set by the user, and baseFee is automatically given by the algorithm.

EIP-1559 Transaction Fee Calculation Example

  • Before the upgrade
  • Miner Fee= GasPrice *GasUsed
  • After the upgrade
  • Transaction Fee= (baseFee + PriorityFee) * GasUsed
  • maxFee >= baseFee + maxPriorityFee
  1. EIP-1559 Resources 🔥
  2. Deribit Insights | Analysis of EIP-1559

Relevant Tool for EIP-1559

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imToken

Wallet for Ethereum ETH, Bitcoin BTC, Arbitrum, Optimism, zkSync, Aztec, Polkadot DOT, Kusama KSM, LTC, EOS, Tron TRX, Cosmos ATOM, BCH, Nervos and more