How EIP1559 is Reshaping the Ethereum Transaction System: From Fee Competition to Adaptive Mechanism

In the evolution of Ethereum’s upgrades, no change has sparked such intense community controversy as eip1559. This is not just a technical update but a complete rethinking of the entire blockchain fee model. From miners’ fierce opposition to community hype around “deflationary super currency,” the story of eip1559 is far more complex than just lines of code.

The Current Dilemma: Why Ethereum Must Change

Disorderly Competition for Transaction Fees

Imagine you urgently need to execute a transaction on Ethereum, but you don’t know how much to pay. You look at what others are paying, then bid slightly higher—that’s the current situation. Bitcoin processes about 7 transactions per second, Ethereum is faster but still limited to around 15. When pending transactions pile up, validators prioritize those with higher fees.

This seems logical from a market perspective, but the problem is users are forced into an endless “bidding game.” Everyone wants to pay as little as possible but have their transactions included quickly, leading to a constant race to outbid each other and push fees higher. Especially during the 2020 DeFi liquidity mining boom, fees often soared hundreds of dollars, drastically changing miners’ revenue structure—what used to be only 5-10% of fees sometimes rose to match or even surpass block rewards.

Rigid Block Capacity Design

Another issue is the inflexibility of block resources. Each block has a fixed capacity for transactions, but demand fluctuates constantly. Weekdays are busier than weekends, Asian evenings are more congested than daytime. Occasionally, NFT launches or other sudden demands cause fees to spike to absurd levels—making the blockchain essentially paralyzed for users unwilling to pay such high fees.

The Solution Approach of EIP1559: From Auction Mechanism to Adaptive Engine

Inspired by Second-Price Auctions

The first change was to introduce the concept of second-price auctions. Simply put, all transactions in a block are settled at a uniform price—the lowest bid among the included transactions. Users no longer need to worry about bidding their true maximum; they just specify their minimum acceptable fee, and any excess is refunded automatically.

However, there’s a critical flaw: miners can cheat. After packaging transactions, miners could insert fake high-fee transactions to artificially raise the minimum price, and the fees would still go into their pockets.

The Revolutionary Burn Mechanism

The most straightforward solution is to burn all the fees—destroy them entirely. When fees are burned instead of going to miners, any attempt by miners to inflate fees results in a net loss for them. This seemingly simple move effectively removes miners’ incentive to manipulate fee markets.

EIP1559’s Core Design: Flexible Adaptive Fees

eip1559 adopts a more sophisticated approach: allowing the system to automatically adjust fees based on network congestion.

First, the maximum block size is doubled. If the target is 15 million gas, the cap becomes 30 million. Miners can still fill blocks, but the “fullness” of each block influences the fee for the next block, fluctuating within ±12.5%.

For example: if the base fee is 20 Gwei and the current block is half full (15M gas), the next block’s fee remains 20 Gwei; if the block is less full, it drops to 17.5 Gwei; if the block is full at 30M gas, it rises to 22.5 Gwei.

This design aligns with supply and demand logic but significantly reduces miners’ ability to manipulate. During NFT sellouts or sudden congestion, the network can temporarily process at double speed, causing fees to spike quickly but then naturally fall back during off-peak times—effectively “borrowing” capacity into the future.

Of course, in extreme congestion, the doubled capacity might still be insufficient, and the 12.5% fee increase may not excite buyers. Therefore, eip1559 retains a “tip” mechanism, allowing users to pay extra to incentivize miners for faster processing when needed.

Community Backlash and Divergent Views

Why Are Miners So Angry?

Interestingly, developers may have underestimated the impact of this upgrade on miners. Past measures like reducing block rewards or canceling ProgPoW already upset miners, and the upcoming PoS transition threatens their livelihoods. But this time, the core issue is the destruction of fee revenue.

During the 2020 DeFi boom, miners enjoyed nearly equal income from fees and block rewards. Suddenly announcing that fees will be burned caused an uproar. Miners protested loudly—some accused developers of “money grabbing,” others claimed it would compromise blockchain security (in reality, it increases the risk of reorganizations due to higher fee volatility), and some large pools even called for hard forks.

But the harsh reality is that Ethereum already has a robust DeFi ecosystem, the Beacon Chain is running, and PoS is ready to go—miners’ leverage to oppose is limited.

The Bubble of “Supersonic Currency” Myth

Another controversy erupted among Ethereum Twitter influencers. For years, Bitcoin advocates mocked Ethereum for lacking a supply cap, claiming it wasn’t “digital gold.” Now, eip1559 changes the game—fees are burned, implying a deflationary aspect.

Community leaders like Bankless and EthHub started promoting “Ethereum is not just sound money, but ultra sound money.” Accounts with bat and sound emojis proclaimed that Ethereum would take off, combining DeFi, 2.0, and deflation, surpassing Bitcoin in market cap.

However, eip1559 does not guarantee deflation. While transaction fees are burned, new block rewards are still being issued continuously. Long-term, the oscillation between deflation and inflation is normal.

Sober voices—like the founder of MyCrypto—have warned these influencers to stop misleading. Ethereum is already powerful; there’s no need to spin false narratives. The core development team remains mostly silent, focusing on upgrade stability rather than price speculation. The fact that eip1559 supporters dominate the discourse is already a win for miners.

The Real Impact After EIP1559 Launch

A Straightforward Answer About Price

Nobody knows.

The End of Fee-Free Transactions

Research by Flashbot and ArcherDAO showed a creative workaround: users could set gas to 0 but, during contract execution, directly transfer ETH to the miner address (block.coinbase). This way, wallets holding ERC20 tokens without ETH could still send transactions.

After eip1559, this method no longer works because the system burns fees, and 0 gas would violate the rules. Users can only revert to more primitive meta-transaction relays, awaiting future account abstraction solutions for new possibilities.

The True Liberation of Fee Setting

This is the original intent of eip1559. After the upgrade, users no longer need to monitor mempool conditions in real-time; they can simply reference the previous block’s fee and add a small margin, increasing the likelihood of inclusion in the next few blocks.

For those willing to bid lower and wait patiently, transaction inclusion remains a matter of luck. But for most users seeking certainty, the experience is significantly improved—no longer needing to be a fee prediction expert.

This is the core of eip1559: transforming complex market bidding into an automated system adjustment, making the blockchain more resilient to sudden demand spikes while greatly reducing user decision-making costs.