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Ethereum ETH

New monetary policy is coming on Ethereum: EIP-1559

  • EIP1550 turns ETH into a deflationary asset
  • The launch is scheduled for July 2021
  • 60% of miners are against the proposal

Ethereum Improvement Proposal (EIP) 1559 will create a fee burning mechanism and is expected to go live in July with the London hard fork.


Ethereum’s Gas Problem

Whenever large transactional volumes start being directed through the Ethereum blockchain, gas fees (paid to process transactions) rise significantly. In recent weeks, we saw gas fees reach as high as 1,000 Gwei which meant a simple ETH transfer cost $15 and a swap cost north of $150.


Ethereum Improvement Proposal (EIP) 1559 makes gas fees highly predictable even during high network congestion. It puts constraints on the increase/decrease of the base gas fee in order to make them predictable and more stable.

Currently, gas fees are paid to miners in full which naturally made the past few months highly profitable for them. EIP1559 will divide the fee ito two parts:

  • Base Fee: This is the predictable gas fee required to transact on Ethereum
  • Inclusion Fee: A “tip” paid to miners to incentivise inclusion of the transaction in the coming blocks

The base fee will not be paid to miners, instead it will be burned. This will counteract Ethereum’s inflation and is predicted to turn it into a deflationary asset. The fact that only the inclusion fee will be paid to miners, means there no longer is an incentive to manipulate Ethereum’s gas fees for miners’ own benefit.

Approval & Scheduled Upgrade

According to the “Ethereum Core Devs” call, EIP1559 will be packaged and included in the upcoming London hard fork, scheduled for July 2021.

On the other hand, 60% of the network hash rate (miners) are against this proposal as it threatens their profitability. The biggest risk would be a 51% attack but it remains unlikely as it is not feasible/profitable from an economic perspective.

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