What Does EIP 1559 Mean For Ethereum Mining?

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4 years ago
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This was a crazy research project. I hope I was able to explain eip 1559 and how it impacts mining for you.

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EIP = Ethereum Improvement Proposals
Core EIP: requires network upgrade
Everything else will allow adoption of anytime
Networking
Interface
ERC
Meta EIPs (network upgrades
Information EIPs

EIP is a core upgrade which requires everyone to implement it

EIP 1559
Make transactions fees more predictable
Specifying minimum fee, called the BASE FEE, a transaction needs to be included in a block directly in the header
Reduce inclusion delays for transactions
Doubling the block size and keeping it half empty most of the time
Create a positive feedback loop between network usage and ETH supply
Increasing/lowering the BASE FEE as a demand for blockspace increases/decreases and burning it

FEECAP - Must be larger than the sum of the BASE FEE and TIP

TIP is the miner incentive to not mine empty blocks….. Cannot exceed FEECAP so as the BASE FEE rises mining incentive declines but eliminates harm to user by refending the leftover from FEECAP - BASEFEE + TIP

Legacy transactions supported by setting FEECAP = GAS PRICE but lose refund on user end

Fee Burning
Because miners could collude to keep BASE FEE high. Miners now just get tip and reward
Fees are bulk of miner reward
Burning BASE fee creates a positive feedback loop between network and ETH supply. Basically increasing price by reducing supply.

Misconceptions
“Gas prices will lower gas prices”
No, it just makes it more predictable
“Will Make ETH Deflationary”
Only true if transactions from the Base Fee are consistently much larger than block rewards. TIP doesn’t contribute to supply reduction.

Risks
EIP-1559 doubles the potential of a DoS attack
51% attack to drive base fee to 0 thereby increasing tip potential

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