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Recently, EIP-1559 has attracted much attention and triggered extensive discussions and controversies in the Ethereum community. EIP-1559 is an improvement proposal for Ethereum that has a far-reaching impact on miners and users. Vitalik Buterin himself has urged the progress of the proposal on many occasions . Today, let’s take a look at the main content of the EIP-1559 proposal and the attitudes and views of the big Vs in the Ethereum community on the proposal. 01
What is EIP Before introducing EIP-1559, let us first understand what EIP is. EIP is the abbreviation of Ethereum Improvement Proposals. Ethereum hopes to use the crowdsourcing wisdom of the technical community to determine the future direction of the Ethereum system, rather than concentrating it all in the hands of a few developers. Therefore, everyone can propose improvements to Ethereum. Before being finally executed and integrated into the Ethereum system, the EIP will go through the following stages: Draft: An EIP that is still under open discussion and is undergoing rapid iteration and changes. Review: The EIP author sends a clear signal that the EIP is ready for external review. Final Call: After the initial iteration is completed, it is the stage of final consultation. Final: FINAL does not mean that the EIP has been deployed on the Ethereum mainnet, but only means that the specifications of the EIP have been frozen. After that, only the irregularities in the format of the EIP can be corrected, such as adjusting spelling. Any changes to the content require the opening of a new EIP.
EIP status flow chart EIP-1559 is one of many Ethereum improvement proposals and is currently in the "Review" stage. The following website can be used to query all EIPs and the stages they belong to: https://eips.ethereum.org/all
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What is EIP-1559 The two most criticized points of the Ethereum network are: one is the poor performance, and the other is the high mining fees caused by the poor performance. The EIP-1559 proposal is an improvement to Ethereum's mining fee model. Currently, the Ethereum network uses the First Price Auctions model for mining fees, which means that the higher the mining fee, the more likely it is that the miners will package and confirm the transaction first. In this model, since Ethereum users are spread all over the world and transaction demands change rapidly, users can easily pay too high mining fees unconsciously . In the article "Q&A on Ethereum Transfers, How to Set Mining Fees to Save Money", we introduced the calculation formula for Ethereum mining fees: Miner Fee = Actual Gas Consumption x Gas Price
Users can set the Gas Price according to the congestion of the Ethereum network and their own needs. However, the reality is that many users do not know how to set the Gas Price to a more reasonable value when initiating a transaction, and the Gas Price value recommended by the wallet will also lag behind due to the instantaneous changes in the demand of the Ethereum network. Even for the same block, we can see that the difference between the highest and lowest Gas Prices given by users is very large. Many people pay too high a mining fee, or because the mining fee is too low, they need to wait a long time for the transaction to be packaged . In order to solve this problem, Ethereum founder Vitalik Buterin proposed another transaction fee model, which is now the EIP-1559 proposal. The proposal suggests changing the current Ethereum transaction fee model to: Basic fee + tip
All transactions will be charged a base fee, which is adjusted block by block. This part of the fee will be destroyed instead of rewarded to miners. Specifically, Ethereum's current gas limit is 10 million, with an upward floating space of 10% to accommodate more transactions. This limit will be cancelled in the EIP-1559 proposal and replaced by a long-term average target of 10 million and a hard cap of 20 million per block. When the actual block is less than the long-term average target of 10 million, the base fee will decrease over time, thereby increasing demand; when the actual block is greater than the long-term average target, the base fee will increase over time, thereby reducing demand and ultimately achieving the ideal average block size. Taking the initial value of 100 as an example, the blue area shows what the base fee may reach in future blocks; Source: Deribit The basic fee is set automatically by the system, and the amount is adjusted block by block. In addition, there are tips, which are given directly to miners. When the network is not congested, that is, when the actual block is less than the long-term average target of 10 million, users do not need to give tips, and transactions can be quickly packaged and confirmed; when the network is congested, users need to set tips so that miners can package their transactions as soon as possible. Because when the network is congested, Ethereum's blocks will become larger to accommodate more transactions, and the probability of miners digging out uncle blocks will also increase. Tips are equivalent to a compensation for the risk of digging out uncle blocks. Therefore, if EIP-1559 is implemented, the miner's reward will become: block reward + tip. EIP-1559 has been officially included in Ethereum's "London" hard fork upgrade, which is expected to be launched in July. In addition, at least 5 other EIPs will also be included, among which the "difficulty bomb delay" is also included in this hard fork upgrade. If miners do not upgrade, the difficulty bomb will explode, the "Ice Age" will come, and the mining difficulty of the Ethereum network will skyrocket. 03
What is EIP-1559 and its impact on miners Ethereum miners' income currently comes from three sources: 1. A block reward of 2 ETH per block and additional rewards for uncle blocks. 2. User fees for entering the block space market through bidding, which is what we often call transaction fees. 3. Difficult to quantify, but extremely valuable, miners can extract by inserting (or not inserting) transactions at specific points in the block. This is called Miner Extractable Value (MEV), and most miners currently "outsource" it to leading arbitrage robots, which bid in the memory pool.
Some analysis points out that after the launch of EIP-1559, miners will continue to receive the same income from block subsidies and MEV, and the biggest change is in the second part (i.e. the fee income from packaging user transactions); the analysis points out that the impact of the implementation of EIP-1559 on miners' income will exceed 50%, which is completely unfounded . Of course, this analysis is based on some assumptions, and the actual impact on miners' income will have to wait until EIP-1559 is implemented (if it can be implemented smoothly). 04
Industry experts clash over EIP-1559 There are still many controversies and disagreements about the EIP-1559 proposal. Supporters and opponents have expressed their views on different occasions. Below we have collected the views of some industry leaders, both supporters and opponents, for your reference. On February 28, Vitalik talked about his views on EIP1559 in the Bihu live broadcast room and said: EIP-1559 is very important to the Ethereum ecosystem and can solve many underlying problems for users. For example, users need to choose how high the transaction fee should be. If you want to complete the transaction quickly, you need to pay a high transaction fee. If you choose a lower transaction fee, the transaction may have to wait for an uncertain and long time. EIP-1559 can solve problems like these. EIR-1559 also has many other benefits. One of the benefits that is often mentioned is that most of the transaction fees will be destroyed. In this case, if the total amount of Ethereum transaction fees is higher, the total amount of ETH will decrease, and the Ethereum economic model will become more sustainable . Many people criticize Ethereum, saying that Bitcoin has a total upper limit of 21 million, but Ethereum has no upper limit, so they think ETH will be unstable. If EIP-1559 is implemented and there are more transactions, it is possible that the total amount of ETH will decrease, or the total amount will only increase a little. This change in the economic model is also something that many people are looking forward to. Many people were worried last year that EIP-1559 had many risks because it was a new economic mechanism. But we have done a lot of research in the past year, including our own research, a research report by an American game theory professor, and Filecoin's EPR-1559. Everyone can see the results. So now, the risks of EIP-1559 have been reduced a lot .
Many Ethereum mining pools are opposed to EIP-1559, but f2pool founder Shenyu supports EIP-1559 . During a live broadcast on Mars Finance on March 5, Shenyu said: In the current Ethereum ecosystem, especially from the perspective of experienced users who use various DeFI on Ethereum, Ethereum has a very big fatal problem. That is, each transaction sent out is uncertain, and it is unknown whether the GAS fee of the current future network will change dramatically. In order to make the transaction confirmed faster, many users will pay a GAS fee higher than the current average. But in a short period of time, the network changes dramatically, resulting in the transaction still not being confirmed. I believe that many friends who play Defi will encounter the need to constantly speed up a transaction. This experience is very bad on Ethereum. It may take hours to wait for several transactions to be confirmed. Because transactions are sequential. This makes it difficult for the DeFI ecosystem to develop rapidly, and the user experience is very bad. This is also the reason why many users have to move to other public chains. EIP-1559 fundamentally changes the experience of high-frequency users . Second, 1559 changed the monetary policy . Ethereum previously had no upper limit and was in a state of long-term inflation. Compared with Bitcoin, which has a constant total amount and a model of gradually decreasing inflation in the future, people's expectations for Ethereum's price under the long-term inflation model will be lower. Therefore, destroying the handling fee to a certain extent, especially destroying the relatively high handling fee when the network is congested, will allow the Ethereum public chain to truly capture the ecological value . Another point is that 1559 will charge a basic fee, which may change the transaction pattern on Ethereum. There are currently 1 million transactions on Ethereum every day, which basically exhausts the resources on Ethereum. Among them, there may be more than 100,000 arbitrage transactions. In addition to generating economic benefits for the sender of the transaction, there is no high value, just wasting resources on the chain, and currently the resources on the chain are particularly precious. After the implementation of 1559, arbitrage activities with specific behavioral standards will be difficult to carry out, which can greatly reduce the occupation of resources . Based on the above analysis, if we look at the entire Ethereum ecosystem development from a slightly longer-term perspective and allow Ethereum to gain application value from the ecosystem development, we should support such proposals, rather than looking at it from a short-term perspective.
In addition, Wu Jihan expressed his support for EIP-1559 in the BCH swarm, and made it clear that if the proposal is successfully passed, the price of ETH will soar and miners will also be winners . There is no shortage of opposition to EIP-1559. Ethereum Enthusiasts Editor-in-Chief Ajian has repeatedly published articles opposing EIP-1559 . The following is his statement on EIP-1559 during the live broadcast of Mars Finance on March 5: First of all, it does change the process and experience of users sending transactions, but I don’t think it is a qualitative improvement. Secondly, it changes the situation of consensus providers, and therefore fundamentally changes the security of Ethereum . I think the misunderstanding of this matter is that the EIP-1559 proposal is only related to miners. If this mechanism continues to be used in the Ethereum 2.0 era, it will actually deprive validators of their benefits. So my point is that the proposal changes the situation of consensus providers. Finally, it will have an impact on Ethereum’s monetary policy.
When talking about EIP-1559, Nervos Foundation co-founder Lu Guoning expressed doubts about the necessity of introducing this improved protocol, but at the same time he was optimistic that the final dispute would be gradually resolved in the future . Although I am a co-founder of the Nervos project, my views on this issue do not represent the views of Nervos, but only my personal views. When it comes to the proposal of EIP-1559, my personal attitude is neutral, but with reservations. The problem that EIP-1559 needs to solve is indeed a problem. But I am skeptical whether it can really solve the problem well. I don’t think the EIP-1559 proposal solves the problem it hopes to solve well. At the same time, it introduces a new problem. It hopes that users will have a better experience when sending transactions and paying transaction fees, but it may not be able to solve it well. At the same time, it introduces deflation to the entire system. Whether deflation needs to be introduced through EIP-1559 is a big question. Now that the Ethereum ecosystem and applications are emerging, the problem we should focus on solving is the expansion of the Ethereum network, rather than trying to solve the problem of high transaction fees caused by network congestion by adjusting the fee structure. I have been involved in the Ethereum community since 2016 and have experienced The DAO fork, which was the largest fork in Ethereum history and the most drastic fork, which resulted in two chains, ETH and ETC. Looking at EIP-1559 today, I don’t think the controversy it brings will be stronger than The DAO incident . The entire community discussion of that fork was from the core team to the entire user base, to developers, to miners, everyone was discussing and paying close attention. Today, in my opinion, the discussion of EIP-1559 is more in the media news and among a few interested people. Everyone is a bystander, and everyone is looking forward to the results. Now it is true that, for example, mining pools have different opinions, but on the user side, DeFI developers and project parties, the core team seems to have reached a relative consensus. There is still a period of time before 1559 is reached before the disagreement between the application ecosystem and the mining pool, and there is still a great possibility that it will exist. The debate is not so intense, and we still have time. The DAO incident only gave everyone about a month to decide whether to fork. The scope of the EIP-1559 dispute is not that large, and I am still optimistic that the final dispute will be gradually resolved in the future .
Currently, many Ethereum mining pools are opposed to EIP-1559. Twitter user @Red Panda Mining tweeted on March 8, calling on Ethereum miners to hold a 51-hour computing power demonstration on April 1, and transfer computing power to the mining pool Ethermine that opposes 1559. Of course, it is also obviously to show the outside world that the computing power of these opposing miners may exceed 51% of the current Ethereum network computing power. Previously, because miners insisted on opposing the EIP-1559 proposal, some people were worried that Ethereum might encounter a hard fork. In a live video on March 9, the popular YouTuber Bits Be Trippin said that the proposal was just a goodwill display of computing power and that miners would not carry out computing power attacks . 05
summary The EIP-1559 proposal adopts the "base fee + tip" model. The base fee is completely destroyed, which will have a greater impact on users, miners and Ethereum itself. Therefore, the EIP-1559 improvement proposal has caused huge discussions and disputes in the Ethereum community. The proposal has been officially included in the Ethereum "London" hard fork upgrade expected in July this year. The main opponents of EIP-1559 are miners. According to statistics, the computing power opposing the proposal currently exceeds 60% of the total computing power of Ethereum . There are many uncertainties at present, such as whether EIP-1559 can be smoothly promoted, whether miners will launch computing power attacks, whether ETH will fork a new chain, etc. Zhikuang University will continue to pay attention to the progress of EIP-1559 and the development of Ethereum. Risk warning : The opinions of the experts listed in this article do not represent the views or positions of Zhikuang University, nor do they constitute any investment opinions or suggestions. | 
