The rise of decentralized finance (DeFi) has brought unprecedented growth to the Ethereum ecosystem. However, this expansion has also led to network congestion and soaring transaction fees, making it increasingly difficult for users to interact with applications affordably and efficiently.
In response, Ethereum co-founder Vitalik Buterin and Ethhub.io founder Eric Conner proposed EIP-1559, an upgrade designed to reform the network’s fee market. While intended to improve user experience, the proposal has sparked significant controversy, particularly among miners who stand to see their earnings reduced.
This article explores the key arguments for and against EIP-1559, its potential impact on the Ethereum network, and what it means for the future of the ecosystem.
The Divisions Within the Mining Community
The debate around EIP-1559 came to a head in late February when several major mining pools publicly announced their positions on the proposal.
F2Pool, the third-largest Ethereum mining pool, released a statement titled “On the Right Side of History: EIP-1559,” becoming the first and—so far—only major pool to openly support the proposal. They argued that Ethereum’s rapid growth in DeFi, NFTs, and DAOs has come at the cost of poor user experience due to high fees and failed transactions. F2Pool emphasized that supporting core developers and the broader community is essential for Ethereum’s long-term success.
In contrast, mining pools like SparkPool and BeePool voiced strong opposition. SparkPool described EIP-1559 as “the tyranny of the majority,” arguing that burning the base fee redistributes wealth from miners to token holders. BeePool suggested that increasing the gas limit dynamically would be a better solution to congestion than altering the fee mechanism.
A website called STOPEIP1559, created by FlexPool, tracks mining pools’ stances on the proposal. At the time of writing, 12 pools openly oppose EIP-1559, while only F2Pool supports it. Another seven are considered default supporters because they have not actively opposed the update.
Notably, pools that oppose EIP-1559 represent approximately 63% of Ethereum’s total hash rate. Many of these are Ethereum-focused operations, while supporting pools often also operate Bitcoin mining facilities.
Why Ethereum Needs a Fee Market Reform
Ethereum’s congestion issues are not new. In 2017, the CryptoKitties craze overwhelmed the network, causing transaction fees to spike. The recent DeFi boom has had a similar effect, with gas prices repeatedly breaking records.
Data from The Block shows that Ethereum miners earned over $1 billion in February alone, more than half of which came from transaction fees. While this has been profitable for miners, it has made the network expensive and sometimes impractical for everyday users.
High fees have also driven some projects and users to alternative blockchains with lower costs. Platforms like Binance Smart Chain and others have capitalized on this opportunity, building DeFi ecosystems that directly compete with Ethereum.
EIP-1559 aims to address these issues by introducing a new fee structure. Under the proposal, gas fees would be split into two parts: a base fee that is burned rather than paid to miners, and an optional tip that users can add to incentivize faster transaction inclusion.
The base fee would adjust dynamically based on network demand, targeting 50% block capacity. During periods of high demand, the block size could increase temporarily, helping to smooth out transaction processing and reduce fee volatility.
How EIP-1559 Works and Why Miners Oppose It
Currently, miners select transactions from the mempool based on the gas fees offered by users. This auction-style system often leads to bidding wars during congested periods, driving up costs unpredictably.
EIP-1559 replaces this model with a structured pricing mechanism. The base fee is set algorithmically and must be paid for a transaction to be included in a block. This fee is permanently removed from circulation, creating a deflationary effect on ETH.
Miners receive only the tip portion of the fee, which is optional and paid by users who want faster confirmation. While the deflationary mechanism could increase the value of ETH over time, most miners expect their short-term earnings to decrease significantly.
This reduction in revenue is the primary reason for miner opposition. Many feel that the proposal unfairly redistributes value away from those securing the network.
Is EIP-1559 the Best Solution?
Proponents of EIP-1559 argue that it is a necessary step toward improving Ethereum’s usability. Tim Beiko, who leads coordination efforts for the proposal, believes that technical challenges remain but that implementation is likely by July as part of the London hard fork.
Vitalik Buterin has stated that the proposal’s main benefit is more reliable transaction inclusion, typically within one to two blocks. He also acknowledged that miner resistance is expected but that the network can adapt if some miners choose to leave.
Some critics, including Columbia University computer science professor Tim Roughgarden, argue that EIP-1559 does not truly solve Ethereum’s scalability issues. High fees, he suggests, are ultimately a problem of supply and demand—not mechanism design. Only increased scalability can address the root cause.
Even supporters like Jihan Wu, founder of mining pool BTC.com, admit that EIP-1559 is an intermediate solution. The real long-term fix, he notes, is Ethereum’s transition to proof-of-stake (PoS) in ETH 2.0.
The Role of the Difficulty Bomb and ETH 2.0
Another factor influencing the timing of EIP-1559 is the so-called “difficulty bomb.” This mechanism gradually increases mining difficulty over time, eventually making proof-of-work (PoW) mining impractical. It is intended to incentivize the transition to PoS.
If the difficulty bomb is activated in July as scheduled, it could coincide with the implementation of EIP-1559. This would mark a critical step in Ethereum’s evolution toward a more scalable and sustainable network.
ETH 2.0 promises to address scalability through sharding and other technical improvements, reducing reliance on transaction fee market reforms. In this sense, EIP-1559 is a bridge rather than a permanent solution.
Frequently Asked Questions
What is EIP-1559?
EIP-1559 is a proposal to change Ethereum’s fee market mechanism. It introduces a base fee that is burned and an optional tip for miners, aiming to make transaction costs more predictable.
Why do miners oppose EIP-1559?
Miners oppose the proposal because it reduces their earnings from transaction fees by burning the base fee. This directly impacts their profitability.
Will EIP-1559 reduce gas fees?
While EIP-1559 may make fees more predictable, it does not directly solve scalability issues. Lower fees ultimately depend on increased network capacity through solutions like ETH 2.0.
How does EIP-1559 affect ETH value?
By burning a portion of transaction fees, EIP-1559 introduces a deflationary mechanism that could increase the value of ETH over time.
When will EIP-1559 be implemented?
The proposal is tentatively scheduled for inclusion in the London hard fork, expected around July 2021.
What happens if miners continue to oppose EIP-1559?
Since miners do not have direct veto power over protocol upgrades, opposition may not prevent implementation. However, coordinated resistance could lead to network instability.
Conclusion
EIP-1559 represents a contentious but potentially transformative upgrade for Ethereum. While it aims to improve user experience by making fees more predictable, it has exposed deep divisions within the community—particularly between miners and developers.
The proposal is best understood as an interim solution ahead of Ethereum’s broader transition to proof-of-stake. For those interested in tracking the latest developments and understanding how these changes may impact the ecosystem, 👉 explore more network strategies.
As the network continues to evolve, balancing the interests of all stakeholders will be essential to Ethereum’s long-term success.