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Ethereum EIP 1559 London upgrade


Sajjad Hussain
Ethereum EIP 1559 London upgrade
Photo by Zoltan Tasi on Unsplash

After the popularity of Ethereum, everyone wants to take part in the Ethereum network, due to oversize traffic and millions of transactions the Ethereum become a congested place for users, many users of the network start complaining about too high transaction fees, during the last bull run the nine out of ten users worry over the congestion and say that confirmation time is too slow and fees are much higher, the users start expressing that it is much better to switch to the other blockchain projects.

Ethereum upgrade EIP-1559, is a kind of proposal that change the on-chain fee pricing mechanism, fundamentally, it is a gas fees charging method that will be changed from auction type pricing method to a market exchange rate pricing method, the actual amount of the fee will be affected by consensus of the miners, the Gas fee will be divided into the base fee and the miner fee, if the usage of the network is more than 50%, the basic fee will be increased, if network usage is lower than the basic fee is must be minimum, but the miner fee which is charged on the basis of transaction processing remains unchanged.

EIP-1559, purposes the shift of the transaction confirmation from miners to the transaction generators, in previous method miners can choose the high price transactions, miners try to pack only those transactions that can charge the high gas fees, therefore the transactions generators must increase the gas fees, in EIP-1559, this old fashion PoW style is alleviated, after the upgrade, transaction generators can set a basic fee based on the urgency of the transaction, the dominant power of the transaction processing is shifted from the transaction miners to the transaction generators, this upgrade will definitely lead to t reduction in transaction cost

The current Ethereum mining algorithm is Ethash which is basically the PoW consensus algorithm, in PoW, the miners are the core of the blockchain, responsible for maintaining the ledger, which is technically generated by the blockchain algorithm. This upgrade will eventually change the consensus system from PoW to PoS, the intention of such upgrade is to encourage everyone to pay the associated transaction fee and according to the reference price, if the network is in the congestion state no one raises the money, and the system will offer more opportunities to the miners for making more money.

The reduction of basic fees reduces the overall circulation of ETH, therefore, increased the ETH value greatly, furthermore due to the prosperity of the Ethereum network the amount of basic fee will be greater than the additional currency issuance, this will lead towards the deflationary model, the scarcity of ETH is guaranteed thereby increasing the value of network currency.

EIP-1559 does not purpose the capacity expansion rather then this upgrade solves the congestion problem of the network, PoW is like the first-price auction system, in other words, that transaction that pays the highest fees will be selected by the miners, you can consider this like if 10 transactions in the pool the miner only select those transactions which give them a big reward if a miner has the limit only to select 5 highest prices then after the first iteration the next 5 also those transactions that pay the highest fees to miners, therefore users face the too long waiting time for transaction completion.

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Source: https://medium.com/cryptocurrencies-ups-and-down/ethereum-eip-1559-london-upgrade-b05865769e83?source=rss——-8—————–cryptocurrency

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