Ethereum’s much awaited EIP-1559 upgrade finally went live on Thursday, August 5, 2021.
The most significant improvement in the ‘London Hardfork,’ EIP-1559 introduces a transaction fee burning mechanism with the intention to restructure processing fees on the platform.
In the new structure, users pay a base fee. This base is burnt each time it is paid so that it is removed from circulation.
In the fist 24 hours since the upgrade, the network reportedly burned 4,600 ETH, which is approximately $12 million.
So far, a total 9189.8 ETH have been burned up to now.
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SEE ALSO: Making ETH a Deflationary Currency with the Upcoming Ethereum ‘London Hard Fork’
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The new base fee is also designed to adjust dynamically based on demand on the network. Under EIP-1559, the fee changes alongside block size, and will target a specific level of gas usage close to the gas limit. If gas usage falls under the target, the base fee decreases to encourage demand.
Traditionally, a user sends a gas fee to a miner for a transaction to be included in a block. That gas fee will now be sent to the network itself as a sort of ‘burn’ called base fee with only an optional tip paid to miners.
The upgrade was introduced so that users pay a fair fee, but there were expectations that the burning of fees would make ETH a deflationary currency. This is still not the case, since for every block mined, 2 ETH is rewarded to miners for helping to run the network. This adds up to a total of 12,700 ETH roughly every day.
Currently, this reportedly ends up reducing the amount of inflation by 36%, which still helps to slow down the increase of the circulating supply over time.
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RECOMMENDED READING: Understanding Ethereum 2.0 and Why It Matters
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