The EIP (Ethereum Improvement Proposal) is an improvement proposal for the Ethereum commission system; it is considered one of the main improvements made so far in the Ethereum blockchain network.

Does Ethereum need the EIP-1559?

Ethereum faces one of the significant challenges since its creation; it is the congestion of its network with the current commission system. In 2017, co-founder Vitalik Buterin said that the transaction price should not cost 5 cents, but we see that today, sending an ERC-20 token can cost up to 10 dollars; we also see that in a token exchange on some platforms, the commissions may have a higher price per transaction.

The way Ethereum currently operates is under a commission system where its miners are encouraged to confirm transactions with a higher commission, which means that network users are incentivized to pay more per transaction if they need urgent confirmation; which inevitably leads to a vicious circle since if the network is in high demand, there will be an increasing number of users with large capital, and these users will pay high commissions due to the emergencies to receive a confirmation, being relegated those users who cannot pay high commissions for the use of the network.

Will EIP-1559 be the solution for Ethereum?

The Ethereum network is currently going through a “hard” fork called Berlin, which is considered an update of the network; Berlin seeks to modify the “gas rate” requirements (a name given to the commissions for transactions in the ecosystem), and, allow new types of transactions; with the Berlin update, the foundations could be laid for the next, larger fork called London, activating the EIP-1559, the most anticipated revision by the network, although somewhat controversial within the Ethereum tariff structure.

“Elasticity” of the blocks

One of the creators of EIP-1559 clarified that reducing current congestion and high commission prices are not the objectives of EIP-1559, but what it is intended to do is introduce the concept of block elasticity, which means doubling the theoretical maximum capacity of the platform. Likewise, it adds that transaction fees are a function of supply and demand. Technically, there is no increase in the “average space” of available blocks since the fee mechanism is designed to serve half of the maximum block capacity.

As you can see, the update will not be the long-term solution that Ethereum needs to end its scalability problems; however, there is optimism adding that, as more solutions continue to be adopted, charges and network congestion problems will be reduced.

Disgruntled miners?

One of the main debates is related to the proposal for a 50% reduction in the reward for mining after the implementation of the London hard fork; however, miners were already aware that this moment would come when Ethereum made the transition to a proof of stake framework; therefore, it can be said that the change is difficult to accept but was inevitable.

What do you think about this topic? Do you think EIP-1559 will improve the operation of the Ethereum network?

If you want more information about buying and selling cryptocurrencies, you can subscribe to our newsletter and receive the free manifesto entitled the future of nations will go from economic systems to economic software.

Image from Die-Witschaftsnews via Pixabay.com under Creative Commons license.


Leave a Reply

Your email address will not be published.