What Is Ethereum's EIP-1559 Update and What Did It Bring?

Update note: This article was first published on July 23, 2021, before the London upgrade went live. EIP-1559 was activated on Ethereum's mainnet on August 5, 2021, at block 12,965,000, as part of the London upgrade, according to ethereum.org. The sections below explain the proposal as it was planned; what happened afterwards is summarized at the end.

EIP-1559 is one of the most important changes in the history of Ethereum. It changed how transaction fees are calculated, with the aim of making fees more predictable and the user experience smoother.

What is Ethereum?

Ethereum is a blockchain network that offers open access to digital money and applications, regardless of where a user lives. Its native cryptocurrency is ether (ETH). Like every blockchain, Ethereum keeps a shared ledger in which all transactions are verified and recorded, which makes the network transparent and hard to tamper with.

London: the upgrade around EIP-1559

EIP-1559 was part of a larger upgrade called London, which bundled several Ethereum Improvement Proposals (EIPs). Besides EIP-1559, London included EIP-3198, EIP-3529, EIP-3541 and EIP-3554. Before going live on the mainnet, London was tested on public test networks such as Ropsten, starting in June 2021.

How EIP-1559 changed transaction fees

Before EIP-1559, users bid for space in a block, and the highest bids were included first. As Ethereum grew, this auction made fees hard to predict, and transactions were often delayed. EIP-1559 split the fee into two parts, as the specification describes:

Base fee: A mandatory fee per unit of gas that the protocol sets automatically for each block. It rises when blocks are fuller than the target and falls when they are emptier. The base fee is not paid to anyone; it is burned, which means this ETH is permanently removed from circulation.

Priority fee (tip): An optional extra amount that users can add to have their transaction included faster. The tip goes to the party that produces the block.

For users, the main effect was that wallets could estimate fees far more reliably. For the network, the burning of the base fee linked ETH's supply to how much the network is used: in periods of high activity, more ETH is burned.

What it meant for miners at the time

In 2021, Ethereum was still secured by miners. They received newly created ETH and, before EIP-1559, the full transaction fees. After the change, they only kept the tips, while the base fee was burned. Many miners were therefore critical of the proposal when this article was first written.

What happened afterwards

EIP-1559 went live with the London upgrade on August 5, 2021. About a year later, on September 15, 2022, The Merge switched Ethereum from proof of work to proof of stake, ending mining on the network (ethereum.org). Since then, validators who stake ETH produce blocks and receive the tips; the base fee is still burned. The mechanism introduced by EIP-1559 remains a core part of how Ethereum fees work today.

Anyone who holds ETH today can take part in securing the network through staking. Providers and terms are compared in our comparison of staking platforms.

EIP-1559: What to take away

EIP-1559 made Ethereum fees more predictable and turned part of every transaction fee into burned ETH. It was a building block for later upgrades and is still active today. Crypto assets are volatile and you can lose your entire investment. This article explains a technical change and is not a recommendation to buy or sell ETH.