- Ethereum EIP-1559 has been approved for the ‘London’ upgrade
- The protocol has been hotly contested by miners
- What are the essentials of the new EIP and why are they causing arguments?
Ethereum’s hotly contested EIP-1559 improvement protocol was approved last week, which will dramatically alter the way transactions are handled on the blockchain. But what is it, why is it so important, and why are miners kicking up such a stink over it? Our quick guide to Ethereum EIP-1559 explains all.
It Will Happen in July
The upgrade will take place in July, by which time we might even be able to travel around the world to celebrate it! We don’t have a specific date, which will be released closer to the time, but that only gives miners four months or so to prepare.
With the introduction of EIP-1559, the concept of traditional blockchain transactions will be upended. Instead of fees being manually adjustable and sent to miners, a fair ‘basefee’ will be algorithmically levied and sent to the network to be effectively burnt, with an optional ‘tip’ able to be sent to miners.
As a result, the fees will be cheaper and there will be no more ‘gas wars’ when the network gets congested.
Miners Don’t Like It
This isn’t a surprise as it will massively reduce the amount of money Ethereum miners get paid per transaction. This will be equally tough as they have enjoyed a bumper 2021 – in February alone they netted $1.3 billion. Ethereum mining pool Flexpool even launched a marketing campaign against adopting EIP-1559, followed by other miners, although not all are against it – F2Pool, which has some 10% of the total hash power, is for the move.
The Old Chain Will (Probably) Die
Ethereum developers decided on a recent call discussing EIP-1559 to introduce a delay to the ‘difficulty bomb’ at the same time as introducing the upgrade. Pairing EIP-1559 with the delay should help ensure no one forks Ethereum at the time of implementation time without having to undergo considerable technical hurdles.
Miners could still sabotage the attempt by carrying out a 51% attack on the network, which is eminently possible given that 60% of hashing power is against the move. However, the principle reason against a 51% attack remains in place – Ethereum miners would only succeed in crashing the Ethereum price, something that would only end up hurting them.
Ethereum Will be a Deflationary Cryptocurrency
Given that a small amount of Ethereum is essentially burnt with every transaction, Ethereum will very likely turn into a deflationary cryptocurrency, particularly after the Ethereum 2.0 upgrade is fully implemented.
The shift from a proof-of-work to a proof-of-stake consensus algorithm will see the amount of ETH introduced into the network reduced from 4.7 million to anywhere from 100,000 to 2 million, and when you factor in regular burning of those produced tokens we could easily see a situation where there is more ETH being burnt that introduced.
London Calling for Ethereum EIP-1559
Despite being included in the ‘London’ update for July along with other EIPs, there is still a chance that EIP-1559 might not go ahead. It seems then that Ethereum EIP-1559 will go ahead in July, meaning that, six years after the Ethereum Genesis block was mined, the principles that have governed its network ever since could be entirely upended.