Peter Szilagyi, an Ethereum (ETH) developer, has expressed admiration for EIP-1559 and its burning mechanism, referring to it as “the great equalizer.” Since the implementation of EIP-1559, Ethereum has undergone significant changes in how users bid gas fees. One of the notable adjustments is the introduction of the “base fee,” which is either burned or sent to an irretrievable wallet. Data from Ultrasound Money reveals that over 3.9 million ETH have been destroyed thus far, with more than 21,100 ETH being burned in the last week alone, effectively removing them from circulation.
Szilagyi highlights the advantages that regular users now have with EIP-1559. Through this implementation, validators, who were previously miners when Ethereum operated on a proof-of-work blockchain, no longer have the privilege of arbitrarily adjusting gas limits and transaction fees. This previous leeway created an “imbalance,” making it challenging for regular users to compete. However, with the introduction of EIP-1559, everyone must adhere to the same rules, regardless of their role as a validator, founder, or user.
At the protocol level, EIP-1559 sets the adjustment of the “base fee.” This base fee is burned by the network, resulting in a gradual deflation of the ETH supply. The number of coins taken out of circulation since EIP-1559’s inception in August 2021 demonstrates the effect of this mechanism. Although validators no longer have control over gas fees, a sender can still “tip” the validator to incentivize them to prioritize their transaction.
A growing consensus among Ethereum supporters supports Szilagyi’s positive view of EIP-1559. In addition to the price impact of the proposal, EIP-1559 enhances the user experience by providing senders with greater predictability in transaction costs. This is particularly valuable during congested network periods. Furthermore, while Ethereum gas fees remain relatively high, EIP-1559 has brought stability to the network, despite Szilagyi considering it a “bad idea.”
ETH burning through EIP-1559 aims to reduce the inflationary pressure in Ethereum. Unlike Bitcoin, Ethereum does not have a capped supply. Consequently, the long-term impact of this proposal might benefit ETH prices. However, in the short to medium term, price upside is limited to around the psychological round number of $3,000.
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