What Is EIP-1559?

Ethereum’s EIP-1559, activated with the London upgrade in August 2021, redesigned how transaction fees are calculated and paid on the network. Instead of a single “gas price” auction, Ethereum now uses a dynamic “base fee” that is burned and a “priority fee” (tip) that goes to validators. This change aimed to make fees more predictable, improve user experience, and align Ethereum’s economics with long-term sustainability.

If you use Ethereum today—on mainnet or many Layer 2 networks—you’re already relying on EIP-1559 mechanics when you set “Max Fee” and “Max Priority Fee” in your wallet. For the full technical specification, see the formal proposal on the Ethereum EIPs site: EIP-1559.

• EIP text: EIP-1559: Fee market change for ETH 1.0
• Ethereum Foundation overview: EIP-1559 and the London upgrade
• Developer guide: Ethereum gas and transaction fees

Why EIP-1559 Was Introduced

Before EIP-1559, Ethereum users bid in a first-price auction: you guessed a gas price and hoped it was high enough. This had two core problems:

• Fee volatility and guesswork led to frequent overpayment and “stuck” transactions.
• UX complexity made it hard for wallets to show reliable estimates.

EIP-1559 introduced a protocol-level estimate of demand (the base fee), which adjusts block by block to target a certain level of network usage. The base fee is algorithmically set and is the same for all transactions in a given block—then burned—while users add a small tip to incentivize inclusion. This combination reduces guesswork and dampens volatility, as explored in Tim Roughgarden’s analysis of EIP-1559.

• Academic analysis: A note on the EIP-1559 fee market

How EIP-1559 Works

EIP-1559 adds three key components to every transaction (Type 2):

• Base fee: Set by the protocol per block; it rises when blocks are more full and falls when they’re less full. The base fee is burned.
• Priority fee (tip): An optional extra you pay to the block proposer (validator) for faster inclusion.
• Max fee: Your cap for total per-gas spending. You never pay more than base fee + priority fee, and anything unused is returned.

Blocks are “elastic”: the protocol targets a certain amount of gas per block, but can temporarily expand capacity up to a cap, then adjust the base fee accordingly. The base fee moves up or down by a limited percentage per block (bounded adjustment), which smooths short-term demand spikes. For implementation specifics, see EIP-1559 and EIP-2718 (typed transaction envelopes).

• Typed transactions: EIP-2718

Example:

• You set Max Fee = 80 gwei and Max Priority Fee = 2 gwei.
• If the base fee when your transaction is included is 60 gwei, you pay 60 + 2 = 62 gwei.
• The remaining 18 gwei headroom is not spent and is returned.

What Changed for Users and Wallets

• More predictable fees: The base fee provides a shared, protocol-calculated price signal, making estimates more reliable.
• Less overpaying: You cap what you’re willing to spend (Max Fee), and the protocol only charges what’s needed, returning the rest.
• Better UX: Wallets can show the base fee, suggest a reasonable tip, and protect users from common pitfalls.

To monitor live conditions, users often check the Etherscan Gas Tracker and adjust for the current base fee and their urgency.

• Live data: Etherscan Gas Tracker

Does EIP-1559 Make Gas Cheaper?

Not directly. EIP-1559 improves the fee mechanism, but it does not increase base network capacity. In other words, it makes fee estimation more stable and reduces fee spikes’ severity, but total cost is still driven by supply (block space) and demand (network activity). Real cost relief for many use cases comes from scaling—especially Layer 2—and from upgrades like EIP-4844 that reduce data availability costs.

• Scaling and proto-danksharding: EIP-4844
• Roadmap context: Ethereum’s Dencun upgrade and danksharding path

Who Gets Paid—and What Gets Burned

• Burned: The base fee is destroyed, permanently removing ETH from circulation.
• Earned by validators: The priority fee (tip) and protocol issuance (consensus rewards). After The Merge, validators rather than miners receive these.
• MEV is still a factor: Maximal Extractable Value flows to validators or block builders in the post-Merge architecture; EIP-1559 doesn’t eliminate MEV but coexists with proposer-builder separation and related tooling.

For a real-time view of ETH issuance versus burn, the ultrasound.money dashboard is a widely used reference that tracks supply, burns, and net issuance.

• ETH supply and burn dashboard: ultrasound.money
• MEV background: MEV on ethereum.org

Interactions with Layer 2 (L2)

Many L2s adopt EIP-1559-like fee markets for their own execution environments, giving users a familiar base fee + tip experience. Meanwhile, the cost of posting data back to Ethereum mainnet is a major driver of L2 fees. The Dencun upgrade (EIP-4844) introduced blobs, a new, cheaper data channel with its own fee market, significantly reducing data costs for L2s. This is separate from the main execution gas market but complementary to the overall goal of lower, more predictable user fees.

• Dencun and blobs: Ethereum’s EIP-4844 overview
• EIP text: EIP-4844: Shard Blob Transactions

Best Practices for Setting Fees

• Use Max Fee prudently: Set a ceiling that covers potential short-term spikes. You’ll only pay what’s needed.
• Keep a reasonable tip: The priority fee can be small during low congestion, but during high demand (or when competing in MEV-heavy environments), a higher tip can speed inclusion.
• Check current conditions: Quickly glance at a gas tracker before transactions with strict timing needs.
• For batch or contract-heavy interactions: Simulate first (many dapps and wallets offer simulation) to understand how much gas you’ll consume and set an appropriate Max Fee buffer.

If your transaction gets stuck because the Max Fee was too low, you can often “replace-by-fee” (same nonce, higher tip and max) to speed it up.

Common Misconceptions

• “EIP-1559 makes gas cheap.” Not necessarily; it smooths fee volatility. Actual cost depends on demand and available block space.
• “Validators don’t earn fees anymore.” They still earn tips and consensus rewards; EIP-1559 burns only the base fee.
• “ETH is now always deflationary.” Not always. Net issuance depends on activity (burn) and validator rewards; the supply can be inflationary or deflationary over different periods. See ultrasound.money for up-to-date data.

For Developers: Transaction Type 2

EIP-1559 introduced Type 2 transactions with fields:

• maxFeePerGas
• maxPriorityFeePerGas

Libraries and RPC providers widely support Type 2, but ensure your tooling and contracts handle EIP-1559 fields correctly. For advanced fee logic—like paying tips based on urgency or MEV protection—coordinate with your RPC and relayer setup. The canonical technical reference remains the EIP itself.

• Spec and implementation details: EIP-1559

Why This Matters for Security and Self-Custody

More predictable fees translate to fewer failed or delayed transactions in critical moments (liquidations, NFT mints, time-sensitive governance). A secure wallet should:

• Expose EIP-1559 fields (Max Fee and Priority Fee) clearly
• Provide sane defaults and up-to-date estimates
• Support simulation and transaction replacement when needed

OneKey supports EIP-1559 transactions on Ethereum and major Layer 2 networks, letting you adjust Max Fee and Priority Fee with clarity, then sign safely on a hardware device. If you often transact around volatile events, having granular fee control and offline signing is a practical advantage for both UX and security.

Key References

• EIP-1559 specification: EIP-1559: Fee market change for ETH 1.0
• Typed transaction envelopes: EIP-2718
• Ethereum Foundation blog on the London upgrade and fee market changes: Ethereum Foundation Blog — London
• Gas fee concepts and developer docs: Ethereum.org — Gas and fees
• Live network conditions: Etherscan Gas Tracker
• ETH issuance and burn: ultrasound.money
• Proto-danksharding and blobs: EIP-4844 and Ethereum.org — Dencun, danksharding path

By understanding how EIP-1559 sets the base fee, when to raise a priority tip, and how Max Fee caps your spend, you can transact with more confidence—especially when paired with a hardware wallet like OneKey that gives you precise control and secure signing for Type 2 transactions.