EthFans Editor-in-Chief Ajian: Miners will not accept EIP-1559 because it is a permanent deprivation of income

Abstract : The implementation of EIP-1559 raises the prospect that the chain using 1559 will not be able to kill the fork that does not implement 1559 by its own success, because its success will not bring higher transaction fee income to attract miners to migrate permanently. This is also why miners will not accept 1559. This is not a short-term reduction in income, but a permanent deprivation of income. (Under PoS, the deprived are the validators.)

Everyone has heard about the debate about EIP-1559 to some extent. If you know more, you will also know that I am one of the few people who have been opposing it and writing articles to express my views.

At this point in time, it may be impossible to discuss EIP-1559 calmly as a policy. In all public opinion spaces, the pros and cons are almost at loggerheads. However, the reason for this is that people did not discuss the policy itself, but first formed a prejudice, and then divided the good guys and the bad guys based on the reaction of others to this prejudice; the bad guys will certainly not give in, but "I" stand on the side of justice, and there is always a way and power to make them give in.

For example, EIP-1559 is an experience to reduce the amount of ETH issuance and even achieve deflation; deflation is of course a good thing, so those who oppose this are naturally bad people; or the opponents are not bad people, but what's the point of your opposition? The tide of history is mighty, and your opposition is not only useless, but also a bit stupid; oh, but this proposal will burn the commission income that originally belonged to the miners, so the miners will definitely oppose it, after all, it's about profit; but you people, who have already made so much money, are actually unwilling to sacrifice your small family for the sake of everyone, which shows that you are not good people; but what can you do, can you still fork? What's the use of forking? With the 1559 chain and the support of the community, it will definitely be more successful. At that time, it depends on whether you say no or not, but whether you are honest with your body.

I have a few questions:

(1) Is deflation necessarily a good thing? Are there any conditions?

According to the quantity theory of money, it is true that deflation will lead to an increase in the purchasing power of money. The problem is that how to achieve deflation is not an insignificant issue. Like the EIP-1559 proposal, the speed of deflation is not fixed; that is, the issuance rate of ETH itself will become unstable; this instability will bring great obstacles to the operation of the money market, just like unexpected inflation also affects the money market, causing excessive investment and insufficient savings. Unexpected deflation has the opposite effect. In other words, a good monetary policy should be a policy with as stable an issuance rate as possible. (Of course, rebuttals are welcome)

(2) Will miners definitely oppose proposals that reduce their income?

I think if you propose to reduce block rewards, it will also reduce miners’ income, but the disagreement will definitely not be as big as EIP-1559. There won’t even be any disagreement, and everyone will just accept it. At most, fundamentalists like me will complain about why ETH’s monetary policy is still not stable.

When discussing 1559, one of the most common fallacies is to say, "Isn't this just reducing miners' income by 50%?" This is not true. This is not the same as reducing block rewards. The essence of 1559 is to ensure that miners' income from providing gas is only related to their marginal costs through dynamic operations; that is, even if Ethereum becomes more and more successful and the cost of transactions entering blocks will rise, these incomes have nothing to do with miners and will all be burned. This is not just reducing miners' income, it is depriving miners of the opportunity to benefit from Ethereum's success.

Therefore, this is not just a short-term profit consideration as stated in the public statement of F2Pool. On the contrary, the income related to transaction fees is the most long-term, even longer than block rewards.

(3) Miners, even if you have the guts to do this, do you have the ability to fork? Can you still not mine ETH after implementing 1559?

Oh, you are right this time. Miners will still mine ETH with 1559 implemented, for sure, but they will fork and use machine gun pools.

Let me explain it with a moving picture:

The above picture demonstrates the process of Base Fee upward adjustment. The blue line sloping downward is the demand curve, which represents the highest price users are willing to pay for each unit of gas. The position of this line also represents the strength of market demand. The orange line sloping upward is the supply curve, which is the miner's own marginal cost curve and the lowest price they require for each unit of Gas. When the market demand is relatively strong and the number of packages agreed upon by users and miners exceeds the target usage defined by the EIP-1559 mechanism, the Base Fee will continue to adjust upward until the Gas consumption that users are willing to send transactions is exactly equal to the target usage.

This picture can explain a lot of things, including the claim of EIP-1559 supporters that because the Base Fee that is constantly adjusted upward can create half-full blocks, the price that determines whether a transaction can be included in the block, in addition to the Base Fee, is the marginal cost of the miner, not the bids of other users. The marginal cost of miners is more stable and predictable than the bids of other users, so it can improve the user experience. (I agree with what they call the "half-full block" effect, but I don't think the marginal cost of miners is easy to predict, that is, I don't think this method can really provide a qualitative improvement. But, how to say it, in fact, many supporters don't understand how this view is proven.)

However, have you noticed that during the entire adjustment process, the price obtained by miners has always been the lower edge (P2\P3\P4) of the green graph (that is, the amount of ETH burned), and has nothing to do with the user's evaluation of Gas.

In other words, assuming that Ethereum is very successful and users are willing to pay twice as much for a unit of Gas, can miners get more transaction fee income? No, because the difference between the user's valuation and the miner's marginal cost will be swallowed up by the Base Fee.

what does that mean?

This means that if there is another forked chain that does not implement 1559 and does not consider the difference in block rewards, the fee income that miners receive when mining these two chains may be the same. See the figure below:

In the forked chain shown on the right, there are no users, so the blue demand curve is very far to the left, indicating that users have a low evaluation of the unit of Gas. However, the miner's fee income is the same as the income in the left picture (the 1559 chain with stronger demand), which is the triangle below the TIP line and above the marginal cost curve.

In other words, if there is an Ethereum fork chain now, the one with 1559 and more users will not be able to kill the fork chain with its own success; because its success has nothing to do with miners and will not bring overwhelming benefits to miners, so miners will not give up this fork chain. Miners will only allocate computing power in near real time based on the value of block rewards on the two chains, which is what we know as the machine gun pool. And every time the number of users on this fork chain increases by one point, the advantage comparison between the two chains will reverse by one point.

I will not deny that it is very likely that the chain with 1559 will have a higher coin price. After all, the cryptocurrencies on the forked chain may be smashed.

But ask yourself, what good is this for Ethereum? A group of people swore that EIP-1559 would bring higher security and smooth the fluctuations in Ethereum mining computing power, but the result is that Ethereum may fall into greater fluctuations in computing power . This is the unexpected result of fatal arrogance.

We often say that miners’ income determines the security of a chain, but we contradict ourselves by supporting a policy that will limit miners to block rewards as their main income forever. Similarly, Ethereum users are quietly deprived of the right to buy more security by paying a higher price. On a chain that implements 1559, the cost of sending a transaction can still determine whether the transaction is placed earlier or later in the block, but this cost cannot buy security.

(“How do I know what you’re saying is right?” “Use your reasoning.”)

Finally, will Ethereum fork?

As far as I know, none of those who criticize 1559 sincerely hope that Ethereum will fork, no one really thinks war is a good thing, and no one likes the entire ecosystem to fall into chaos. On the contrary, those who support 1559 are more likely to talk about forks, with a hint of "I don't think you dare".

From my personal perspective, I don’t know how to eliminate the atmosphere that permeates the Ethereum community: on the one hand, miners are considered to be a group of immoral people who only care about their own happiness and don’t care about what happens to others; on the other hand, they believe that the final outcome of the operation of society is purely determined by power, so as long as there is someone or a group that is powerful enough, they can subdue this group of immoral people and force them to surrender and make concessions.

I will not discuss whether miners should be held responsible for many user experience issues. I will discuss the latter: Is the operation of a society really determined by power? Or, can those with power do whatever they want? Or, can power plus wisdom transform society and make it progress? My answer is no.

The most important lesson we have learned from social sciences, especially economics, is that we cannot change the mechanism of society as we wish without causing bad consequences. Just like the planned economy cannot be implemented, not because people's moral level is not high enough, but because they lack sufficient information to make reasonable decisions.

In a confrontational atmosphere, it is easy for everyone to get caught up in the pleasure of forcing the enemy into a corner and not care about how much they have to pay. However, no group or individual is the enemy of wrong policies, and eliminating them will not make things better; the real enemy of wrong policies is economic laws.

However, it may be useless to say these things. Ethereum may still fall into a fork because people are unwilling to give up a seemingly good policy, and are even more unwilling to give up their prejudice against another group.

I say this just to let you know:

1. This is not a short-term thing, nor is it just about interests; it is about loyalty. If implemented, Ethereum miners will no longer be half loyal to Ethereum; it is about tolerance. Are you willing to accept that there are another group of people in society who you don’t understand but provide services to others. I know some people don’t care about this kind of loyalty, but I hope someone cares.

2. When you discuss policies and express your support, please try to stay sober and take responsibility for yourself and others. None of the Athenian usurpers (tyrants who destroyed the democracy of the city-state) came to power without a beautiful banner.

Resources related to EIP-1559 discussion

Supporters

• Tim Beiko: Why do we need 1559?

• Micah Zoltu: A Tale of Two Pricing Schemes

• Hasu & Georgios: Analysis of Ethereum Improvement Proposal EIP-1559

• Pintail: Ethereum transaction fee market reform: Will EIP 1559 raise fairness issues?

• Vitalik: Why I’m not worried about the loose block capacity in EIP-1559

• Hasu ￥ Georgios: Ethereum miners will accept the EIP-1559 proposal, why?

• f2pool: Why we support 1559

Opposition

• Opinion | EIP-1559 is just a futile exercise with no benefit (revised version)

• What was missing in talking about EIP-1559

• Five arguments against fee burning in EIP-1559

Ethereum Magician Forum Discussion Thread:

In these materials, you can understand the main reasons put forward by the supporters (UX improvement, prevention of account abstraction, better security, better economic model) and the rebuttals put forward by the opponents against these aspects.

The first two articles on the opposing side are from me, and the third material helps to understand the reasons why other members of the community oppose 1559.

Finally, the original thread of Ethereum Magician Forum Discussion 1559 shows the most concentrated opinions. However, there are more than 300 replies to this thread (and replies are still being generated at this time), and some of the replies are very long, so it is difficult to read them, and you can only read them in English. It can be said that in this field, everyone can observe clear confrontations. I highly recommend that you read this discussion thread directly. It is also okay to read from the end.