Ethereum Developer Proposes New EIP-1559 To Slash Gas Fees Down 90%
Developer Proposes A New EIP To Save 90% Of Ethereum Transaction Costs
Every transaction on the second-largest blockchain Ethereum has some cost attached to it. One must pay for doing anything say sending tokens, ETH or interacting with a contract on this blockchain. This payment is calculated in Gas and this gas is paid in Ether (ETH).
Regardless of whether a transaction succeeds or fails, you will be paying for the computation. These fees are paid to miners for mining transactions, putting them into blocks and to secure the blockchain.
Now, Eric Conner, who is building EthHub has proposed a new Ethereum Improvement Proposal (EIP) to improve the fee system that involves following benefits to Ethereum and its users.
- Save up to 90% of transaction costs
- Greatly improve user experience by automating the fee bidding system
- Provide a predictable fee system for advanced users
- Reduce unexpected wait times for transaction confirmations
- Allow users to still “jump” the line when the network is congested
- Disincentive selfish mining even if fees dominate rewards
- Enshrine the economic value of ETH at the protocol level
To Improve The Ethereum Ecosystem
In his medium post, he shares the difficulty in estimating the optimal average fees and avoiding the unexpected long delays, that needs to be prioritized and resolved to retain existing users and further improve user adoption within the Ethereum ecosystem.
Currently, in order to determine the price of the fee, the system uses a simple auction mechanism which is the “source of frustration.” In first price auction, everyone has to submit their bid that is the gas price for exactly how much one is willing to pay for their transaction to be picked up by a miner.
Usually, the highest fees transactions are selected by the miners which involve overpaying by over 5x in many cases. According to the author, “this model fails to properly price in cost because it assumes that the optimal level of usage is the same regardless of demand.”
Suggesting the improvement on this system, the author says, the users should submit the bids as normal but everyone pays only the lowest bid.
“While this appears at first to reduce inefficiencies, it can be easily gamed by miners who will fill up their own blocks in order to increase the minimum fee. It’s also gameable by transaction senders who collude with miners.”
Pointing out the new solution that was proposed by Ethereum co-founder Vitalik Buterin in 2018 that takes a hybrid approach, he shares that BASEFEE is the starting point that is to be adjusted up and down by the protocol itself depending upon the network congestion.
This would be set automatically by the wallet of most users along with a “tip” which is the only compensation minors are allowed to keep as BASEFEE will be burned.