Aave Announces Support for Ethereum Improvement Proposal (EIP) 1559
Popular DeFi lending protocol Aave has announced its support for the contentious Ethereum Improvement Proposal (EIP) 1559.
The update is a transaction pricing mechanism with a fixed-per-block network fee that gets burned and dynamically expands/contracts block sizes to deal with congestion.
While the fees won’t necessarily become cheaper for users, it will be far more predictable, allowing them to avoid overpaying — a common problem with the current fee model.
This proposal will ensure only ETH can ever be used to pay for transactions on Ethereum, and the base fee will be burned, destroyed by the protocol.
With the Ethereum network using an auction mechanism where users send transactions with gas prices and miners choose the ones with the highest bids, Ethereum co-founder Vitalik Buterin proposed this upgrade over two years back.
The world’s largest asset manager, Grayscale, in its “Valuing Ethereum” report praised this upgrade, calling it a “positive feedback loop for Ether’s price.”
The report published earlier this month talked about the EIP-1559 proposal reducing the possibility of economic abstraction, the ability to pay fees in an asset besides Ether, which may also serve as a deflationary mechanism.
Because the new “base fee” is burned rather than paid out to miners, a few miners like Flexpool oppose the proposal. As such, a community call is scheduled on Feb 26th to discuss the implementation of the proposal.