Ethereum’s EIP 1559 upgrades are live!
The crypto market has seen a resurgence over the past few days. I think it’s due to Ethereum’s highly anticipated EIP 1559(Codename London) went live on block #12,965,000 which was Thursday, Aug 5th.
The EIP 1559 upgrades changes Ethereum’s PoW model drastically to help with network congestions since the Ethernet has seen a huge increase of network activity due to more users on the platform, also due to NFTs(Non Fungible Tokens)becoming widely popular over the past year.
The “London” hard fork also doubled the block size of Ether but aren’t using the extra space?
Prior to the EIP 1559 upgrade, Ethereum’s PoW model required users to go into a auction-style bidding system where you pay a if you offer more fees, the faster it will take since miners are more inclined to process your transactions first since that makes them more money through those fees.
EIP 1559 changed that system and now those transaction fees are calculated through an algorithm where the fees are higher if there is more network activity. And instead of the fees going to the miners, those calculated fees are burned instead(sent to inactive ether address, so it’s out of rotation) but you can still choose to “tip” miners to provide incentives for miners to pick up your transaction first.
Okay, it sounds like users can still prioritize transactions with extra fees(tip) so what’s the big difference for users?
While the transaction formula is seems practically the same, this change provides casual users a much easier process. Prior to the upgrade, users would have to constantly do mental math on how much fees to provide but with the new system, the Eth system will automatically set your fee based on the network activity.
This upgrade is also an attempt to make Ether more deflationary by burning off some supply every time new Ether are minted in the system.
$41 million USD worth of Eth burned seems like a lot but not really if you consider that there’s almost $30 Billion USD worth of Eth in rotation today.
Only time will tell if this new system will make it deflation proof but at the moment it seems to be working.
From my research, the Ether network Hashrate has not dropped at all, which tells me the fee system change hasn’t scared off any miners yet.
Big Block Energy
Another major upgrade included with EIP 1559 is the new increased block size. However, that doesn’t mean Ethereum can process more transactions. The new block size is sort of a support implementation for the new fee system. By having more available block space, the system can handle any overflow transactions and this is to prevent network congestion which typically causes the fees to skyrocket due to people needing to run their transactions asap for whatever reasons that might be. This provides the new fee system with predictable network activity data which then they can charge fees accordingly.
Here’s the link for the full EIP 1559 change log that goes into detail about all the new implementations:
All the upgrades seemed to have went off smoothly and Ethereum was able to maintain their network hashrate even though miners are at a 23% profit lost but as a gamer who casually mines Eth, I haven’t seen much difference due to the fact that the price of Eth has also gone up which kind of just balances it out.
This Eth upgrade has also shown that big miners are also willing to adapt to new industry standards since they had to update their mining software for the EIP 1559 upgrade. This will be a major key for when Eth 2.0 comes out next year which will switch their current PoW model to a PoS model, which aims to cut down energy consumption by 80%.
As a coder and a crypto enthusiast, I am happy to see Ethereum evolve and grow and continue to adopt more users and investors to the platoform.
If you are interested in the Eth 2.0 upgrade, you can read my post here:
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