Few updates have been as significant as EIP 1559. Vitalik Buterin called it “The first really significant change to the Ethereum Protocol.” But why was this proposal so crucial?
Ethereum Improvement Proposal (EIP) 1559 turned the traditional auction-style transaction fee model on its head. Instead of users bidding on how much they were willing to pay to have their transaction included in a block, EIP 1559 introduced a base fee that everyone must pay. This fee varies based on network conditions, and it ensures that transactions are reliably included in the next one or two blocks.
This may seem like a small change, but the impact is massive. EIP-1559 has reduced the average wait time for a transaction to be included in a block by over 40%. The result is a far better user experience.
But the change doesn’t stop there. All of the ETH paid as part of the base fee is burned. When combined with the reduced ETH issuance from the transition to proof of stake, this makes ETH a deflationary asset or “ultra-sound money.” If Bitcoin is sound money because of its fixed monetary supply, Ethereum is even better.
However, it wasn't always clear that this improvement would happen.
“Many people in the Ethereum community are very excited about this proposal, though so far there has been fairly little funding toward getting it implemented. This Gitcoin grant was a large community effort toward fixing this.“
In Gitcoin Grants Round 6, EIP-1559 was the #1 grant selected by the community. Thanks to the support of over 400 community members and the quadratic matching fund, EIP 1559 raised more than $60k. The Ethereum community spoke up and its voice was clearly heard. EIP 1559 went live in 2021 as part of the London Hard Fork — forever changing the Ethereum protocol.