While there are $6 Billion worth of ether staked in eth 2.0, people are eagerly waiting for further news on it, especially due to high transaction fees on the network. Many people have started to shift to low cost BINANCE smart chain and tron network, however, there can be some good news for eth users, as EIP-1559 is in works and weeks away from its launch.
So lets understand how EIP-1559 actually works.
Current Fees system
Every Ethereum transaction has an associated cost that are paid in ether (ETH) also known as “gas.”
Currently, it is using an auction system to determine which transactions are to be included in a block thus miners are able to manipulate the gas price in case of congestion. So to have their transactions included in the same block, some users often pay more than other users. However, estimates say that 90% of user transaction costs could be reduced by switching from the current system to EIP-1559.
In EIP 1559 all the transaction fees and block size are divided into 2 parts: base fee and tip fees
ETH Base Fees
So instead of the current auction system it is proposed that the new EIP-1559 system will be algorithm driven to give users more predictability and away from price manipulations by miners. All a user needs to do is to type the ether it needs to transfer and the wallet providers will calculate the fees. Also, the base fees generated will be totally burned instead of giving it to the miners. This will reduce the supply of ether and drive up the prices of ether. The way base fees works is explained below:
Until the blocks are less than 100% full your transaction will just cost you the base fees.
Tip Fees
Now if a person wants his transaction to be completed earlier he/she needs to give a small tip, which will be received by miners, unlike in base fees, which will incentivise them to include tipped transaction in the next 100% block size.Once all the urgent transactions are cleared, non-urgent transactions would be executed as the base fee decreases. Thus most users won't have to wait for long for their transaction.
Conclusion
This is a really great proposal as it improves the tokenomics of the ether coin and also, reduces the manipulation in the system, bringing more organisation in it. However, one concern is that it reduces the incentive of miners very heavily just relying on tips. But, if ethereum has to succeed it has to make it more efficient and economic for users to use it, otherwise people will start to shift to other cheap and efficient systems.
For more information please refer this article.
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