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If there’s one thing this summer’s DeFi boom taught us, it’s that Ethereum’s gas tariff structure needs reform.
Although things have calmed down since the summer, scam fees and blocked transactions are still a problem for Ethereum users. In fact, a failure to address the problem will only give rival blockchains an advantage in stealing market share.
The problem lies with the Ethereum auction transaction pricing mechanism. With this system, users are encouraged to outperform others’ bids to get their transactions mined on the blockchain faster.
This incentivizes miners to fill new blocks with transactions that make them more profitable. As such, the auction system leads to “bidding wars” of ever increasing gas tariffs. Also, the ripple effect sees low-profit transactions left in the network queue.
The core developers are well aware of the problem. Their answer is Ethereum Improvement Proposal (EIP) 1559, which seeks to address the commission mechanism.
The original 2018 document that introduced EIP 1559: https: //t.co/eav6Y1MtIR
– vitalik.eth (@VitalikButerin) June 30, 2020
Although prominent figures in the Ethereum community support EIP 1559, it is unclear whether this proposal will become “production”. Especially considering the funding required, as well as the extensive testing and development work required.
EIP 1559 is exactly what the world needs right now. https://t.co/7K3AmTF5SO
– vitalik.eth (@VitalikButerin) 20 October 2020
This unique situation has no easy answers. Developers can’t do anything about it and wait for ETH 2.0 but risk losing market share in the process. Or they can invest resources in implementing EIP 1559, which could further delay ETH 2.0, only to cancel that work anyway in the future.
Ethereum users want to change
As mentioned, it is no fun to pay beyond the odds while transactions remain pending.
On the more extreme end of this, a Reddit user recently entered the social media platform to share his $ 9,500 spending experience for a $ 120 transaction.
@ProudBitcoiner claims to have accidentally typed an incorrect amount into MetaMask’s “Gas Price” field, which led to overpaying.
“Metamask did not fill the” Gas Limit “field with the correct amount in my previous transaction and that transaction failed, so I decided to manually change it in the next transaction (this one), but instead of typing 200000 in” Gas Limit ” , I wrote it in the entry field “Gas Price”, so I paid 200,000 GWEI for this transaction and destroyed my life: / “
This experience highlights the lack of controls in place to curb the greed of miners.
According to EIP 1559, this situation would not occur as the charging mechanism works on a per block basis. It is not an auction system like the one we currently have.
Additionally, a commission coverage mechanism means that users set a maximum price they are willing to pay. This amount covers both the “miner’s bribe” and the block reward fee.
Without the implementation of EIP 1559, not only miners’ greed drives blockchain dynamics, but incidents, like what happened to @ProudBitcoiner, are set to continue in the future.
EIP 1559 adds the deflationary mechanism
EIP 1559 also proposes a change to Ethereum’s monetary policy. Under this proposal, the consumption of the base tariff will reduce the supply of Ether according to its use.
“An important aspect of this commission system is that miners can only keep the miner’s bribe. The base rate is always burned (ie destroyed by protocol). Burning it is important because it removes the miner’s incentive to manipulate the commission to extract more commissions from users “.
As such, network activity could directly affect Ethereum’s price by adding scarcity to the mix.
@ Pentoshi commented that this would have a similar effect to Bitcoin halving, but, as he puts it, “just without the label”.
https://twitter.com/Pentosh1/status/1325845601213440001
Without EIP 1559, some argue that market dynamics would hinder true price discovery.
ETH 2.0 replaces the old Proof of Work system
While the benefits of EIP 1559 are clear, what it isn’t is how it would work in combination with Ethereum 2.0. Also, if the effort to implement it is “worth the squeeze”
StealthMail founder Evgen Verzun said Ethereum 1.0 shouldn’t be permanent. He said Ethereum, as a Proof-of-Work blockchain run by mining algorithms, is being phased out.
With that in mind, is the work that will go into EIP 1559 a smart use of resources?
One thing is certain, no matter how the Ethereum Foundation supports itself, a barrage of criticism will come from the opposing camp.
Source: ETHUSDT on TradingView.com
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