An EIP-1559 Update - The Daily Gwei #321
Over 100,000 ETH has now been burned, but have we earned it?
EIP-1559 went live just 20 days ago and as of today the network has already burned over 100,000 ETH ($320 million worth). Much of this burning has been led by the NFT mania with OpenSea being the top burner of ETH by far (you can check the leaderboard here). Though we’ve all heard enough about the burn at this point so in today’s piece I’m going to focus on the other properties of EIP-1559.
Firstly, let’s take a look at what adoption has been like for 1559-style transactions as many wallets have now rolled out their support for this transaction type (including MetaMask). According to Blocknative’s thread from a couple of days ago, EIP-1559-style transactions now account for ~50% of all transactions on the network. This is quite a rapid pace of adoption considering EIP-1559 has only been live for 20 days but I do expect this to taper off as we get to the 80%-90% mark for various reasons (wallets taking a long time to update, bots not being updated etc).
Now let’s take a look at if EIP-1559 has actually achieved its stated goal of “smoothing out transaction fees”. Takenstheorem has a good tweet here that shows what gas prices were like before and after EIP-1559 and as you can see, gas prices are much smoother in a 1559 world. Though these smoother fees have come with the trade-off that there is rarely a time during the week where fees are in “off-peak” mode such as a Sunday when network activity is quiet. If we look back at pre-1559 and say that the average weekly gas prices were around 50 gwei then you could’ve had success getting transactions in at 20 gwei or less during an off-peak period. In a post-1559 world this isn’t really something we will see again (due to the way 1559 works which you can read more detail about here).
Lastly, one less-talked about aspect of EIP-1559 is that miners taking advantage of MEV-related tools like Flashbots can no longer just push transactions into a block with a 0 gwei fee - they will always have to pay at least the base fee in ETH (which is then burned). This works to eliminate one of the toxic externalities of MEV that was miners being able to just receive direct payment out-of-band for including transactions in blocks (in any currency - not just ETH) and then none of that value flowed back to the network itself. Now, because the ETH paid as the base fee is burned, at least some value from MEV extraction is flowing to ETH holders.
So it seems that EIP-1559 has so far fulfilled its stated design goals even though 50% of the network is still using the legacy transaction type. The only real negative I’ve seen is how some wallets display 1559-style transaction settings - the UI’s can definitely be confusing for users and there needs to be more work done here (though it’s a relatively easy fix). All in all, I’m pretty satisfied with EIP-1559 so far and I’m looking forward to increased adoption of it (and, of course, more ETH being burned).
Have a great day everyone,
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