An Innovation in the Gas Rate Market / Burning Concept
In the current Ethereum system, new transactions need to be packaged by a miner to enter the next block. A higher gasPrice can also encourage miners to package transactions. A rational miner always wants to package the transaction that carries the largest transaction fee. During the peak period, the gas cost becomes unpredictable or even uncontrollable.
EIP-1559 Ethereum Improvement Proposal
The proposal, first made by Vitalik in 2018, aims to reduce transaction fees by introducing fixed rates and a burning mechanism, thereby making the dynamics of the Ethereum blockchain fee more predictable and alleviating congestion.
EIP-1559, a Predictable Market Rate
The basefee will dynamically adjust so that the total gas used in a single block approaches the limit of 10 million gas. Instead of going into miners’ pockets, the basefee will be burned.
To incentivize miners to package transactions, users can also set Tip, a parameter of the maximum amount that users are willing to pay when a transaction is packaged into the block. In the end, miners will receive the tip.
The basefee does not fluctuate drastically on changes in network demand, and alleviates the inefficiency in the past “bidding” model (which is what the tip follows), making the gas fee more predictable.
EIP-1559 Burning Mechanism
The burning mechanism promoted by EIP-1559 (the destruction of the basefee) establishes the dominance of ETH in the Ethereum ecosystem, provides a deflation mechanism for the supply of ETH, and makes tokens scarce and secured in the long run. All these will benefit ETH holders as a result.