Ethereum developer Péter Szilágyi recently praised the Ethereum Improvement Proposal 1559 (EIP-1559) and its mechanism of burning ETH, referring to it as “the great equalizer.” EIP-1559 revolutionized the way users bid gas fees by introducing a “base fee” that is either burned or sent to an irretrievable wallet. This implementation has significantly leveled the playing field between validators and regular users, as it eliminates the privilege of validators arbitrarily adjusting gas limits and transaction fees.
Before the implementation of EIP-1559, the imbalance in gas fee adjustments created challenges for regular users, making it difficult for them to compete with validators. However, with the introduction of this proposal, adherence to the protocol level base fee adjustment is mandatory for all participants, regardless of their status as a validator, founder, or user. This change has given regular users an advantage, as they no longer have to compete with privileged validators.
Predictability and Stability
One of the significant benefits of EIP-1559 is the improved user experience, particularly in predicting transaction costs. This feature is crucial, especially during network congestion. With the implementation of the base fee adjustment at the protocol level, senders can now have a clearer understanding of how much they will pay for a transaction. This predictability brings stability to the network and enhances user satisfaction.
Since the activation of EIP-1559 in August 2021, more than 3.9 million ETH have been burned. The base fee adjustment, which is burned by the network, makes Ethereum gradually deflationary. This mechanism has a positive impact on reducing inflation in Ethereum, which does not have a capped total supply like Bitcoin. Over the long term, this reduction in inflation could potentially benefit ETH prices.
Despite being considered a “bad idea” by Szilágyi, EIP-1559 has played a crucial role in stabilizing the Ethereum network. This stabilization is evident in the relatively high Ethereum gas fees, which have become more predictable and steady since the implementation of this proposal. Although there is still room for improvement, EIP-1559 has undoubtedly contributed to creating a more stable environment for Ethereum users.
While EIP-1559 has long-term potential for price benefits, the short-term outlook remains bullish but limited. Currently, ETH prices are hovering around the psychological round number of $3,000. Although the price may experience fluctuations, significant upsides beyond this level are limited for now.
EIP-1559 has emerged as a game-changer for Ethereum users, bringing significant improvements to the network. The implementation of the base fee adjustment has leveled the playing field between validators and regular users, promoting fairness and competition. Additionally, the predictability and stability it offers have enhanced the overall user experience. Although there are ongoing discussions and debates surrounding EIP-1559, its positive impact on reducing inflation and stabilizing the network cannot be overlooked. As Ethereum continues to evolve, EIP-1559 sets the stage for a more user-friendly and sustainable ecosystem. However, it is essential to note that investing in Ethereum or any other cryptocurrency carries risks, and individuals should conduct thorough research before making any investment decisions.
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