EIP-1559 is an Ethereum Improvement Proposal that was implemented with the London hard fork on August 5, 2021. Its main purpose is to reform Ethereum's transaction fee system by introducing a new fee structure:
- Base Fee and Fee Burn: Each transaction now includes a "base fee," which is a minimum price per unit of gas that dynamically adjusts based on network congestion. This base fee is burned, meaning it is permanently removed from circulation, reducing the total supply of ETH.
- Priority Fee (Tip): Users can also include a "priority fee" (or tip) to incentivize validators to prioritize their transactions. This tip goes directly to the validator who includes the transaction in a block.
- Economic Impact: By burning a portion of transaction fees, EIP-1559 ties ETH's scarcity to network activity, potentially making ETH more valuable as usage increases. This mechanism also makes transaction fees more predictable for users.
- Community Impact: While EIP-1559 was supported by many developers and users, it faced opposition from some miners due to the reduction in their fee revenue. However, the shift towards proof of stake has further reduced miners' influence on the network34+2.