EIP-1559: Separating Mechanisms From Memes

EIP-1559 has the dubious honor of being Ethereum's Most Misunderstood Upgrade™. Despite many years passing since EIP-1559 was activated as part of the London fork (Aug. 2021), misconceptions about the upgrade still persist today.

A decent number of these myths are result of the "Ultrasound Money" movement emphasizing EIP-1559's base-fee burning mechanism (and the consequential reduction in supply of Ether) and hitching ETH's "deflationary issuance" on this feature.

However, EIP-1559 was clearly conceived as an upgrade to Ethereum's fee mechanism to improve UX and make the chain economically sustainable–not to accrue value to ETH by burning ETH or reduce gas fees as claimed in certain circles. Post-EIP1559, the following things have happened:

• Transaction waiting times have reduced (e.g., due to more predictable gas pricing mechanics for users)
• Fee volatility on Ethereum has decreased (e.g., due to block sizes dynamically expanding to cope with market demand)
• Ethereum's transaction fee mechanism has become resistant to manipulation by sophisticated actors (100% of base fees are burned, rendering those bribes to validators useless)

This report (https://research.2077.xyz/eip-1559-separating-mechanisms-from-memes) from 2077 Research dives deep into EIP-1559's design–analyzing the historical context for changing Ethereum's transaction fee mechanism–and debunks certain misconceptions around EIP-1559's design goals. We also discuss the benefits of EIP-1559 in more detail and touch (briefly) on multidimensional fee markets and similar improvements on the original EIP-1559 proposal.

PS: A tweet thread summarizing the article's main takeaways is available on X: https://x.com/2077Research/status/1830618981146743270