EIP-1559 was introduced in the London Hardfork on August 4th 2021.
What even is EIP-1559?
This Update changed the way gas fees work on the Ethereum network. Previously there was a simple auction mechanism - when the blocks are full, space in the next block is simply given to the highest bidder. To simplify this a bit, imagine every block could contain 100 transactions. When there are more than 100 transactions coming up for the next block, the protocol would include the 100 that have the highest gas fee attached to it. This caused very volatile and unpredictable spikes in gas fees, whenever a popular NFT mint or other peaks of activity happened. Also, all of these gas fees would go to the miners.
After EIP-1559 the whole gas mechanism has been reworked. The fee is now split into two parts: the base fee and the priority fee(tip)
base fee is chosen by the protocol and depends on how full the blocks are. To continue with our example from before, imagine the blocks can now include up to 200 transactions, but aims to have 100 in them. So when there are more than 100 in the block, the base fee rises by up to a maximum of 12.5% at the full 200 transactions. On the other hand, the base fee drops, when there are less than 100 transactions included. This part of the fee is completely burned, which means it is removed from the circulating supply of ETH.
Then there is the priority fee, also called tip. This part only makes up a small part of the fee(~10%) and can be used to put your transaction in front of other transactions with the same base fee. This part goes to the miners.
To this day, more than 2.57 million ETH has been burned, which equals to ~4.15 billion USD at current prices. Considering that miners sell most of their rewards, I don't want to imagine where the price would be, if all of this went to the miners, like it used to.
