Contrary to popular belief, EIP-1559 does not seek to reduce Ether congestion and gas rate problems, so what is it for?
Ether (ETH) has soared recently, with the value of the main altcoin surging from $ 1,800 to the high of $ 2,480 since the beginning of April, showing growth of almost 30%. This latest wave of monetary momentum comes in the wake of Ethereum receiving a lot of criticism regarding increased network congestion and transaction costs.
To put things in perspective, since the second half of February, the average cost of facilitating transactions in the Ethereum ecosystem has continued to hover above the $ 16 to $ 20 range, making it quite impractical for people who They seek to facilitate smaller transactions to make use of the platform. In fact, on February 23, the aforementioned fee value skyrocketed to an all-time high of $ 42, drawing the ire of the broader crypto community.
The Ethereum network recently underwent a fork labeled “Berlin,” which, in its most basic sense, can be thought of as a network upgrade incorporating four Ethereum enhancement proposals that seek to modify the gas rate requirements of the ecosystem and allow certain new types of transactions.
The Berlin update appears to be laying the groundwork for the much larger London hard fork that will trigger EIP-1559 – a long-awaited, albeit controversial, overhaul of Ethereum’s existing fee structure.
Will EIP-1559 Solve All Ethereum’s Pain?
Although on paper the upcoming London hard fork promises great things, it is still quite pertinent to delve into the question of whether EIP-1559 will be the long-term solution Ethereum needs to solve its scalability problems forever.
Cointelegraph spoke with Abdelhamid Bakhta, one of the six lead authors of EIP-1559. He noted that as things stand, there is currently a lot of misinformation and half-knowledge floating around the web regarding the upcoming London update.
To begin with, Bakhta clarified that reducing current congestion and high rates is not the purpose of EIP-1559, but rather seeks to introduce the concept of “block elasticity”, which means that the theoretical maximum capacity of the platform is doubled. He further added:
“Transaction fees are a function of supply and demand. And technically, there is no increase in the average available block space because the base rate mechanism is designed to tend to half the maximum block capacity. So the short answer is no, the upgrade will NOT be the long-term solution Ethereum needs to solve its scalability issues. “
However, on a more optimistic note, he added that as more and more layer two solutions continue to be adopted, all network congestion and fee issues will eventually be resolved.
On the subject that miners are not happy with the proposed 50% reduction in their mining reward ratios following the implementation of the London hard fork, Bakhta opined that it is quite evident to see why some of the miners are opposed to the proposal. “Along with gas rates reaching their highest levels in years, Ethereum mining itself has become a large-scale business,” he added.
However, he claimed that miners already knew their business was coming to an end when Ethereum finally transitioned to a proof-of-stake framework, adding that while he understands that this reduction is difficult to accept, the change was inevitable. . Bakhta further noted: “It is not that they were unaware of this proposal. The idea was first introduced by Vitalik in an article titled ‘First and Second Price Auctions and Enhanced Transaction Fee Markets’ in July 2018. “
Layer two solutions are the need of the moment
Providing his thoughts on the topic of how the upcoming EIP-1559 can help the Ethereum ecosystem, Jan Strandberg, Co-Founder and Director of Growth for the DeFi platform’s Yield app, noted that while the update may provide minimal relief to DeFi developers and traders who are tired of high gas fees and long wait times, it is a short-term solution to general Ethereum problems.
In his view, real progress will only be witnessed when Eth2 finally goes live, allowing the network to expand its transaction capabilities from 15 transactions to 100,000 transactions per second. He went on and added: “This will be the real game changer, not just for Ethereum, or even DeFi, but probably for all cryptocurrencies. It will pave the way for real mainstream adoption. ”So it appears that the upcoming London hard fork fundamentally only changes Ethereum’s peripheral economy, without having a significant effect on scalability.
Anton Bukov, co-founder of aggregator DEX 1inch Network, told Cointelegraph that he will be surprised if the next London hard fork goes live before September. In terms of Ethereum’s scalability issues, he agrees that instead of looking towards EIP-1559 as a definitive solution, users should focus their vision on layer two solutions, adding:
“I am very inspired by Matter Labs’ zkPorter, which should help Ethereum reach 20K TPS. I can’t wait for Ethereum to switch to PoS to allow ETH holders to manage network updates. “
Potential risks associated with EIP-1559
Speaking about some of the possible gray areas associated with EIP-1559, Bakhta opined that as it stands, the Ethereum developer team appears to have covered all the potential risks associated with the aforementioned proposal. He elaborated:
“There were two main aspects to consider: the economic analysis and the impact on performance. The objective of the economic analysis was to determine if the new market model was secure and not vulnerable to attack. Regarding performance, there were some concerns about whether the network could handle twice the size of blocks. And the answer is yes.”
On a more technical note, Bakhta noted that the team has been able to successfully process blocks that are almost four times the current size of the mainnet, even more than what EIP-1559 proposed to bring to the table, adding: “EIP- 1559 was a fantastic trip for me. It was great to see the collaboration between all the teams, researchers, authors, economists. This is my personal greatest achievement. “
Strandberg thinks Eth2 is what it all boils down to. “When Eth2 arrives, we will really see something special that will be worth the wait,” he added. A crypto network like Ethereum has to constantly balance the security budget required to keep its system secure and what the miners are (over) charging. Furthermore, after gasoline prices rose significantly on the Ethereum network recently, EIP-1559 comes across as a delayed correction in favor of Ethereum’s ever-growing user base.