# What is EIP-1559?

By [crypto-kingpin.eth](https://paragraph.com/@crypto-kingpin-eth) · 2023-03-07

---

EIP-1559 is an **upgrade** that happened to ethereum in 2021 and it was an important upgrade that had a huge impact in the ethereum community since it aimed to **solve a lot of problems**

in this thread I will explain the details of this upgrade

### How EIP-1559 is helping ethereum?

**1) gas volatility and overpaying problem**

before EIP-1559, miners usually prioritized transactions with the highest gas prices. user must accept a price suggested by the **wallet** or use **3rd party** gas-market estimations like [Gas Price Tracker](https://etherscan.io/gasTracker).

there wasn’t one source of truth and users didn’t know what gas price would **guarantee** inclusion in the next block, Therefore, they had to **stab in the dark** when submitting a transaction and often ended up **paying more** than necessary

also the estimated gas price could fluctuate quickly from 10 to 100 (and more) and each time a user-submitted a transaction, a different number had to be input, with EIP-1559 the volatility of gas price has reduced significantly

imagine this scenario:

_John has just spotted a great opportunity and wants his transaction to be executed as soon as possible. He checks current gas prices to see that a rapid transaction requires 50 GWEI. He expects gas prices to rise as more users may want to seize the same opportunity, therefore, he uses 100 GWEI when submitting his tx. The tx is included in the first block and John pays 100 GWEI for each unit of gas it consumed. However, it turns out that such a high gas price wasn’t necessary. Even with 50 GWEI the tx would be included in the first block – the gas spike John anticipated didn’t happen. As a result, John overpaid 50 GWEI._

EIP-1559 introduced the following changes to the solve this problem:

*   The Ethereum protocol algorithmically determines the gas price based on the current demand on the network (no 3rd party included).
    
*   Block space is variable and can be doubled during sudden spikes in demand to level out gas prices.
    

**2) Inflation**

Before EIP-1559, all the fees paid by users went to **miners**, The fees were effectively washed back and forth between the **participants** of the network and high activity didn’t mean anything for the price

with EIP-1559 a **big portion** of the fees gets **burned**, this makes ETH the asset **deflationary** since **more activity** on the network means more **ETH getting burned** which also means **less ETH in circulation** that may result in an **increase** in price

---

*Originally published on [crypto-kingpin.eth](https://paragraph.com/@crypto-kingpin-eth/what-is-eip-1559)*