Ethereum’s EIP-1559 “does not deliver” as it is “not intended to lower fees”

Source: Adobe / Tobias Arhelger

Ethereum Improvement Proposal (EIP) 1559 is one that keeps going on – discussions, that is. What it doesn’t do is “deliver,” argued the founder and CEO of the popular Ethereum (ETH) -focused wallet manager MyCrypto, but received numerous counter arguments.

The controversial and much discussed EIP-1559 was led to a failed “pedagogical show of force” by reports of the “likely” support of the miners. That said, this bringer of a token burn mechanism and automatic fee setting is included in the upcoming upgrade known as the London Hard Fork and is scheduled for this July.

Unfortunately, while many users were interested in this suggestion, “the social appeal seems to be mainly due to the not-so-subtle promises of“ $ ETH price up! ”And / or“ TX fees down! ”. [while] The early promises of reducing overpayments, market efficiency, fee stability, and even reduced TX fees seem ….. not really a thing, Taylor Monahan said on her Twitter thread.

EIP-1559 is “a fundamental shift to an extensive live network of people, machines, systems, and subsystems, each with massive financial incentives,” and while Monahan said it was even ready to “sacrifice a perfectly perfect solution if it did.” meant more “. People became more empowered to improve the system “- you always have to think about how the proposals work in reality, not in theory.

The reality that seems to be missing in EIP-1559 is that people pay what is recommended by customers, wallets and APIs for random pricing, or a little less than the amount they get when they execute a transaction i.e. the “prevailing market price”. ‘.

While the gas price or priority fee can be influenced by many EIPs, miners, network security needs, and other factors, “the only thing that determines what people pay is what the market pays,” Monahan said. The market only sets a well-founded, ie efficient, price if the participants “carefully weigh their needs vs. wishes vs. time to run down vs. costs (vs. profit)” – which people are not good at, in addition to that there are no exact tools.

And since EIP-1559 seems to ignore a lot of it, it won’t change what users pay for transactions or reduce complexity for the user. “When [ETH] the price goes up [transaction fees] are [gonna] go waaaay up, “claimed Monahan.

just setting up my twttr

– latch (@ latch)

The CEO added that Geth, Etherscan, EthGasStation, MetaMask, MyCrypto and everyone else are currently determining gas prices by looking at recent transactions and then showing users a number of costs with “their roughly assigned values ​​for time.” until the breakdown “the user can roughly indicate where his personal costs intersect in comparison to the timelines.”

She came to the conclusion

“If the information wallets / UIs / Apis / people are used to the [transaction] The cost won’t change … And that [transaction] the costs will not decrease for the users (until it comes into play again -> significantly lower demand) … What exactly do we want to achieve here? “

“Reduce overpayment of transaction fees, not lower fees”

The debate about the gas price then developed.

Ethereum Foundation researcher Barnabé Monnot argued that the main point is not to mix the dynamics of the gas price with the dynamics of the priority fee under the incoming EIP. These are structurally different, and this is the source of most of the benefits of the User Experience (UX) proposal.

“So applying (hard-won) lessons about gas price behavior today would likely result in a bad UX below 1559 and negate most of its benefits. Wallets can still rely on most of the infrastructure developed so far and use them for the rest of the world refine the time. ” as soon as 1559 goes live, “said Monnot.

According to developer James Hancock, EIP-1559 reduces overpaid transaction fees, but not fees. “People who estimate the fee based on other people’s estimates is precisely our overpriced market,” he claimed, adding that the user at EIP-1559 asks the protocol for the base fee and pays for it. “The miner’s tip will rarely change and has its own nuances that people get lost in. Don’t get lost! 1559 is undoubtedly a better fee mechanism.”

Ethereum's EIP-1559 “does not deliver” as it is “not intended to lower fees” 102

Other commentators also made their counter arguments on Monahan’s thread, with many saying that no one was claiming the proposal would lower transaction fees, just that everyone on the same block would pay the same price and therefore bid high without worrying about one Having to overpay as well as that it has promised negative inflation that it will deliver.

Some suggested that the EIP is shifting valuation from miners to ETH holders; that the supply of block space can now respond elastically to demand up to twice the average size, mitigating periods of rapid demand without compromising long-term blockchain size; and that Monahan is just a contrarian.

just setting up my twttr

– latch (@ latch)

Ethereum Name Service (ENS) founder and lead developer Nick Johnson argued that Monahan may have received “bad advice” regarding UX. “Unless a user has to take his transaction into the next blocks, he shouldn’t have to set the miner’s tip (“ priority fee ”) to anything above the minimum,” he said, but instead set the maximum fee.

In the meantime, the tips above the minimum will be used “almost exclusively” by users who “absolutely” need to add their transactions to the next blocks, which will be mostly automated processes, Johnson said, adding:

“If it works as planned, I think it will * reduce * overpayments, offer more predictable fees, and better UX. It certainly won’t deliver * lower * fees, and anyone who tells you they know what’s going to happen to the ether is lying or deceiving the price. “

Ethereum's EIP-1559 “does not deliver” as it is “not intended to lower fees” 1037-day moving average. Source: bitinfocharts.com

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Other reactions:

This thread is embarrassing. With EIP-1559 you can tip in addition to the basic fee. So the inclusion of your transactions in a block depends on the market demand. The point is to make the auction more transparent, which results in fewer users overpaying.

– freddy (@freddycoen) May 27, 2021

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just setting up my twttr

– latch (@ latch)

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Lots of discussions about 1559 today, but one point I didn’t see very clearly is that legacy transactions … https://t.co/lGKRLjQ9az

– Tim Beiko | timbeiko.eth (@TimBeiko)

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EIP 1559 has not been “explored”. The analysis focuses on an average user who does not have time or price preferences and does not stress the gas limit.
It ignores the fact that a particular user actually has a preference.
PoS modeling has similar fatal shortcomings.

– Jan Brrabski (@brrabski) May 27, 2021

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just setting up my twttr

– latch (@ latch)

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just setting up my twttr

– latch (@ latch)

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Learn more:
– What EIP 1559 brings to the Ethereum table
– Ethereum fees remain high even with EIP-1559 – says another analyst

– Bitcoin Transaction Fee Estimator: What Are They And How Do You Use Them?

– Why Ethereum Is Far From “Ultrasonic Money”
– The Ethereum Economy is a house of cards

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