Blockchain
What is EIP-1559?
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In Brief
Learn what EIP-1559 is and how it improved Ethereum’s fee structure, reduced volatility, and introduced deflationary mechanics.
What is EIP-1559? EIP-1559, or Ethereum Improvement Proposal 1559, is an upgrade to the Ethereum blockchain that changed how transaction fees, also called gas fees, are calculated and processed. Introduced as part of the London Hard Fork in August 2021, EIP-1559 improves transaction efficiency, reduces fee volatility, and enhances the overall user experience on Ethereum.
Before EIP-1559, Ethereum relied on a first-price auction system where users bid to have their transactions included in a block. The auction system often led to unpredictable and high fees during times of network congestion. EIP-1559 replaced this system with a more predictable, transparent fee structure.
In this article, we’ll cover everything you need to know about EIP-1559, including how it works, its benefits, and how to buy ETH using Trust Wallet to take advantage of Ethereum's improved transaction system.
The London Hard Fork
The London Hard Fork was an upgrade to the Ethereum blockchain, activated on August 5, 2021, at block 12,965,000. It introduced five Ethereum Improvement Proposals (EIPs) that enhanced the network's efficiency, usability, and sustainability. EIPs or Ethereum Improvement Proposals are a set of technical standards, including protocol specifications, contract standards and client APIs for the Ethereum blockchain. The most important of these was EIP-1559. Other EIPs included EIP-3198, which added an opcode to improve gas fee calculations; EIP-3529, which reduced gas refunds to prevent exploitation; EIP-3541, which improved contract validation; and EIP-3554, which prepared for Ethereum's transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
How Does EIP-1559 Work?
EIP-1559 changed how Ethereum transactions are processed by replacing the old fee system with a more transparent and predictable mechanism. Under the previous system, Ethereum relied on a first-price auction model, where users bid on transaction fees by setting their gas price. Miners prioritized transactions with the highest bids, often leading to unpredictable fees and inefficiencies. During times of network congestion, users would frequently overbid to ensure their transactions were processed quickly, resulting in excessive costs and volatility. The auction-based system created an uneven playing field, as wealthier users could outbid others to gain priority. EIP-1559 addressed these issues by introducing a dual-component fee structure that includes a Base Fee, Priority Fee, and Max Fee.
1. Base Fee
The Base Fee is a mandatory minimum fee required for including a transaction in a block. The Base Fee is determined algorithmically by the Ethereum network based on demand and adjusts dynamically to ensure efficient use of block space. When network usage exceeds 50% of block capacity, the Base Fee increases, while it decreases slightly when usage falls below 50%. The Base Fee is burned after payment, permanently removing it from circulation. EIP-1559 introduces a deflationary mechanism that reduces Ethereum's total supply over time by burning the Base Fee.
2. Priority Fee (Miner Tip)
The Priority Fee, also known as the Miner Tip, is an optional fee that users can add to their transactions to incentivize miners or validators to prioritize processing them. The Priority Fee is paid directly to miners or validators as a reward for including the transaction in a block faster. The Miner’s Tip enables users who are in a hurry to have their transactions processed more quickly by offering an additional incentive.
3. Max Fee
The Max Fee is the maximum amount a user is willing to pay per unit of gas for their transaction. The Max Fee is a cap on transaction costs, ensuring that users do not overspend during periods of high network congestion. If the Max Fee exceeds the sum of the Base Fee and Priority Fee, any excess amount is refunded to the user after the transaction is processed. The Max Fee provides flexibility and cost control, enabling users to set limits on how much they are willing to pay while still ensuring their transactions go through efficiently.
Key Benefits of EIP-1559
EIP-1559 introduced several key benefits that have improved the Ethereum network. The introduction of the Base Fee reduces uncertainty about transaction costs, making them more transparent and easier to estimate. Reduced volatility is achieved through dynamic adjustments to the Base Fee, which stabilizes gas prices during periods of fluctuating network activity.
An important feature of EIP-1559 is its deflationary effect on ETH supply. As the Base Fee is burned after every transaction, it permanently removes ETH from circulation. During periods of high network activity, this burning mechanism can offset or even exceed new ETH issuance from mining or staking rewards, contributing to ETH scarcity.
EIP-1559 has greatly improved user experience by eliminating the need for users to overbid excessively to ensure their transactions are processed promptly, creating a more efficient and fair system for all participants.
Example of How Fees Work
If you set a Max Fee of 100 Gwei, and the Base Fee is 70 Gwei with a Priority Fee of 10 Gwei:
Total transaction cost = Base Fee (70 Gwei) + Priority Fee (10 Gwei) = 80 Gwei.
Refund = Max Fee (100 Gwei) - Total cost (80 Gwei) = 20 Gwei returned.
The structure ensures users only pay what’s necessary while enabling flexibility for faster processing through tips.
How to Buy Ethereum Using Trust Wallet
You can buy crypto, including Ethereum, using Trust Wallet, via our trusted partners. Here’s how:
Select “Buy” from the home screen.
If using the mobile app:
Search for “Ethereum” or “ETH” and select it.
Choose your preferred currency, then enter the amount of ETH you want to purchase.
Select the third party provider & payment method you’d like to use.
Select the Buy button and complete the remaining steps.
If using the browser extension:
Choose your preferred currency and amount, then choose Ethereum (ETH)
Select your preferred third party provider.
Complete the remaining steps.
In Conclusion
With Trust Wallet’s user-friendly interface, buying and managing ETH has never been easier. EIP-1559 has turned Ethereum into a more user-friendly and sustainable blockchain by addressing long-standing issues with transaction fees. To fully understand Ethereum’s improvements, it is important to ask: what is EIP-1559? The EIP upgrade enhances Ethereum’s transaction system by offering greater predictability and efficiency. Whether you’re sending transactions or interacting with decentralized applications (dApps), understanding what EIP-1559 is will help you make the most of Ethereum’s improved network functionality.
Disclaimer: Content is for informational purposes and not investment advice. Web3 and crypto come with risk. Please do your own research with respect to interacting with any Web3 applications or crypto assets. View our terms of service.
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Note: Any cited numbers, figures, or illustrations are reported at the time of writing, and are subject to change.