The technical benefits of EIP-1559

By Yuga Cohler

TLDR: EIP-1559 transactions person allowed Coinbase and Coinbase users to prevention ETH connected state prices without sacrificing confirmation times. Coinbase has besides burned a batch of ETH, permanently reducing the proviso of the 2nd largest cryptocurrency by marketplace capitalization.

On August 5, 2021, Ethereum’s “London” upgrade launched successfully connected mainnet arsenic the past hard fork earlier the modulation to Proof-of-Stake / ETH 2.0. As 1 of the astir anticipated upgrades, London included a important alteration successful Ethereum’s monetary argumentation and transaction interest operation — EIP-1559 — that has proven beneficial to some Coinbase and ETH holders astatine large.

In bequest transactions anterior to London, senders would specify a azygous gas_price they were consenting to wage for their transaction, and miners would prime transactions based connected a first-price auction. With London, the state prices that senders wage are successful portion determined by a block-to-block base_fee_per_gas, which rises and falls with usage of the network.

EIP-1559 transactions let senders to specify 2 values: max_fee_per_gas and max_priority_fee_per_gas. The erstwhile is an precocious bound connected the full state terms the sender is consenting to pay, portion the second is an precocious bound connected the state terms the sender is consenting to wage to the miner of the transaction. The effective_gas_price, i.e. the magnitude that the sender really pays, is past computed as:

The block’s base_fee_per_gas is burned, thereby making the autochthonal currency much deflationary and returning worth to ETH holders.

While determination was important uncertainty surrounding the marketplace effects of EIP-1559, we astatine Coinbase took a proactive attack to guarantee that our infrastructure was prepared to nonstop EIP-1559 transactions connected time 1 of the fork. Based connected the enactment of radical specified arsenic Zsolt Felföldi and Frederik Bolding, we developed a caller state pricing algorithm for these transactions. Crucially, it leverages the caller eth_feeHistory JSON RPC API that allows america to dynamically compute an due max_priority_fee_per_gas based connected marketplace conditions.

We rolled retired this alteration gradually truthful that we could comparison the metrics of bequest and EIP-1559 transactions. Our findings were surprising:

• On average, we saved astir 9% connected effectual state prices (this was computed arsenic the quality successful confirmed state terms betwixt bequest transactions and EIP-1559 transactions).
• At the aforesaid time, we improved our broadcast-to-confirmation clip by 11 seconds, oregon 0.7 blocks (this was computed arsenic the quality successful broadcast-to-confirmation clip betwixt bequest transactions and EIP-1559 transactions).

As Taylor Monahan posits, we fishy that we are capable to simultaneously prevention connected state terms and amended confirmation clip due to the fact that we specify a max_fee_per_gas that is importantly larger than the existent base_fee_per_gas. This makes the effectual priority_fee_per_gas larger than the equivalent bequest transaction, incentivizing miners to see our EIP-1559 transaction successful the adjacent block.

Coinbase executes a ample fig of transactions connected Ethereum to root liquidity and supply withdrawals for our customers, truthful these savings adhd up. As of September 27, 2021, Coinbase has burned 13,800 ETH, for an mean of astir 254 ETH per day. This means we prevention astir 27 ETH per day on state prices from EIP-1559 transactions. Seeing this data, we person rolled retired EIP-1559 to 95% of transactions, preserving a tiny holdback for information postulation purposes. We mean connected yet rolling it retired to 100%.

The London upgrade was a singular accomplishment not conscionable for Ethereum, but for decentralized fiscal networks arsenic a whole. A divers radical of participants crossed the satellite came unneurotic to instrumentality a analyzable displacement successful 1 of the halfway mechanisms that dictates marketplace prices. We’re looking guardant to continuing to enactment with the Ethereum assemblage to propulsion guardant the cutting borderline of DApps & DeFi, and usher successful the caller epoch of ETH 2.0.