It’s official: EIP-1559 is a gas fee failure. Simply put, this particular Ethereum Improvement Proposal (EIP) has not brought prices down. However, it was never really about gas, and instead the focus was on making transaction charges clearer.
Crucially, this means the recent, divisive Ethereum update — which included EIP-1559 — aimed at making fees predictable, not guaranteeing low costs. Like most ‘improvements’ unveiled at the time, the idea was to ease transition to Eth 2.0. One of the most visible changes within this was the introduction of a new base fee. A seperate priority fee is available for those in a rush.
A New Bidding Model
Ultimately, this creates a new bidding model for miners. Basically, they no longer need to ask for faster transactions. Instead, buyers can increase bids to prioritise them. It’s important to note that, as CoinBase reports, transactions are not yet organised on the new EIP-1559 standard. In fact, since the announcement, transaction fees reached their highest since May.
The growing popularity of NFTs and instability within the wider crypto market have contributed to rising gas fees, largely as a result of network congestion. OpenSea, the leading Ethereum NFT marketplace, is now responsible for 20% of gas consumption. It posted $3billion woth of transactions in August 2021 alone. More than 160,000 ETH burnt since the new update, making ETH tokens rarer, too. And, as we all know, scarcity equals value.
In the Era of EIP-1559 Gas Fee Prices May Still Fall
Just because many people have labelled EIP-1559 as a gas fee fail doesn’t mean things won’t get better in the future. 2021 has been the year of NFT projects, but this area of the market is expected to level out, which could mean an end to ridiculously high demand. In turn, this will lead to lower gas fees.
However, as Ethereum becomes more mainstream and more digital interactions take place, costs could still rise. Find out everything you need to know about Ethereum’s update here. Then read up on how the NFT event ‘The Sevens’ led to Ethereum fees rising by 300%.