The developers released the ETH EIP 1559 update in August 2021. The creator of the Ethereum blockchain, Vitalik Buterin, considered it necessary to release it before the start of the second phase of the transition to protocol version 2.0 and the transfer of the platform to PoS consensus. Users perceived the update ambiguously. Let’s talk about it in more detail.

Update Features

 

The abbreviation EIP stands for Ethereum Improvement Proposal. Translated into Russian, this phrase means “a proposal to improve the broadcast system.” In this update, the developers included a large number of innovations, which as a result led to a fairly significant change in the system.

Even during testing, blockchain participants reacted ambiguously to the update. Some of them spoke enthusiastically about the update, while others evoked anger. After the release of the update, the commissions for conducting transactions within the blockchain have decreased. That is, the miners began to receive less remuneration.

The ETH EIP 1559 update is part of the London improvement. It must be understood that it is not directly related to the process of transition to the Beacon blockchain, that is, the introduction of the protocol of the second version. London belongs to version 1.0, which is now the main one in the blockchain.

For reference. The Beacon chain is a test piece of the blockchain that runs on PoS consensus. It is already functioning, so those who wish can earn on staking. But a full-fledged merger is planned for phase 1.5. According to preliminary calculations, it will happen in 2022. 

Implementation result

Due to the ambiguous attitude of the cryptocurrency community towards the ETH EIP 1559 update, developers were in no hurry to implement it. But it was still included in the blockchain on August 5 last year. As a result, the following benefits have been achieved:

  • The process of calculating the commission fee for operations carried out within the blockchain has been improved. Fee volatility has decreased, allowing for better cost forecasting.
  • Due to the decrease in the efficiency of mining, the rate of emission of coins has decreased. As a result, an artificial deficit of the coin is created within the blockchain, which reduces inflation and leads to an increase in the exchange rate against fiat currencies and cryptocurrency assets.

However, there are also disadvantages. Miners especially felt them. More and more news began to appear on the Internet that the purchased equipment brings less income and, therefore, pays off more slowly. However, after a full transition to ETH2, mining will no longer be used to issue a token, and transaction validation and block joining will take place using staking.