The controversial proposal to improve Ethereum (EIP) 1559 would have burned 970,000 ethers (ETH) – valued at $ 360 million in total – last year if implemented. EIP-1559 seeks to lower transaction fees by introducing flat-rate fees alongside a burning mechanism.
The results, based on data from Dune Analytics and published by head of DTC Capital Spencer Noon, have raised questions among some members of the Ethereum community as to why the proposal has not yet been implemented. Twitter user “Laur Science” suggested that it should be implemented in the next hard fork, adding:
“Hopefully we won’t discuss this for another two years while miners get too much ETH and spend it on USD to keep the price of ETH in check.”
Although the idea of burning fees was considered long before Ethereum’s Genesis block in 2015, EIP-1559 was the first serious proposal to suggest incorporating the concept into Ethereum’s code.
The current proposal, which Vitalik Buterin proposed back in 2018, would drastically change the way transaction fees are calculated. EIP-1559 suggests that there be a standard flat rate for all transactions, known as the “Base Fee”. This fee is burned and the incentive for miners is for users to add a tip on top of the basic fee.
The proposal allows the basic fee to be varied in order to keep the block size at around 10 m gas. Ultimately, the proposal has four design goals – predictable fees, consistent block size, increased security, and prevention of economic abstraction (fees are paid in other tokens).
Since EIP-1559 will have a significant impact on how miners generate revenue, it has sparked a backlash in the mining community, which recently achieved record revenue. A week ago, Messari said that Ethereum fees have exceeded Bitcoin fees for a record two months.
On the same day, ConsenSys developer Tim Beiko published the results of a survey of 25 Ethereum-based teams on the proposal. Of those surveyed, 60% answered in favor, but eight of the nine surveyed mining companies said they would reject the proposal if it were implemented as a hard fork.
Earlier this year, Metamask’s lead developer Dan Finlay expressed concern that miners would be responsible for setting the “base rate” parameters. Ultimately, Finlay suggested that the net effect of the proposal would be “to turn the tip into some sort of unit price auction within each block, reproducing all of the problems of the current market, but with the added complexity of this one”.
Nick Johnson, developer of the Ethereum Name Service, said he feared the proposal because “there is no formal analysis to show that 1559 is behaving as intended”.
In response to the ever-increasing gas tariffs, Vitalik Buterin again called for EIP-1559 as the ultimate solution in July.
Transaction fee income is now almost half the income from block rewards. This actually carries the risk of making Ethereum * less * secure due to https://t.co/Dase8SL30z. The fee market reform (ie EIP 1559) fixes this; Another reason this EIP is important. pic.twitter.com/eqU3tAMh67
– vitalik.eth (@VitalikButerin) July 21, 2020
Within a month of Buterin’s tweet, total transaction fees for Ethereum exceeded those of Bitcoin (BTC) before skyrocketing to all-time highs.
This isn’t the first time EIPs have divided the Ethereum community due to wrong goals. Last month, EIP-2878, which would reduce block rewards by 75%, was also heavily criticized by the mining community.