The long-planned "Berlin" upgrade for Ethereum has officially been scheduled. Set to activate at block height 12,244,000 on the Ethereum mainnet, this upgrade is anticipated to occur around April 14, 2021, based on current average block times.
Compared to the upgrade specifications initially published on GitHub on January 19, the final version of the Berlin upgrade omits one Ethereum Improvement Proposal (EIP). The remaining EIPs include:
- EIP-2565: Reduces the gas cost for the ModExp precompiled contract.
- EIP-2718: Introduces a new transaction type for better handling of future transaction formats.
- EIP-2929: Increases gas costs for state access opcodes to enhance network security against certain attacks.
- EIP-2930: Includes optional access lists to mitigate the gas cost increases introduced by EIP-2929.
A significant point of discussion is that following this upgrade, the Ethereum community will shift its focus toward the next major—and highly contentious—update: the "London" hard fork, expected in July. Central to the debate is EIP-1559, a proposal designed to overhaul Ethereum’s transaction fee market.
What Is EIP-1559 and Why Is It Controversial?
EIP-1559 proposes a new on-chain transaction pricing mechanism. Instead of the current gas fee system, it splits fees into two components:
- A Base Fee: This is the minimum amount that must be paid for a transaction to be included in a block. Crucially, the base fee is burned (permanently removed from circulation) and is not paid to miners.
- A Tip (Priority Fee): This is an optional incentive users can add to encourage miners to prioritize their transaction. The tip is paid directly to miners.
This new model is expected to make transaction fees more predictable and could help alleviate network congestion. However, it also means a significant reduction in miner revenue, since the base fee—which constitutes a large portion of current fees—would no longer go to them.
Miner Reactions and Economic Impact
Data from Coin Metrics shows that in February, Ethereum mining revenue exceeded a record $1.3 billion, with about 50% of that coming from transaction fees. Unsurprisingly, the prospect of burning the base fee has drawn strong opposition from many miners.
Approximately 30% of Ethereum’s hashrate, represented by eight major mining pools including BitFly and Ethermine, has publicly voiced opposition to EIP-1559.
Potential Benefits of EIP-1559
Despite miner concerns, EIP-1559 offers several potential benefits for the broader Ethereum ecosystem:
- Improved User Experience: By allowing users to set a base fee according to transaction urgency, the proposal shifts some control from miners to users, potentially breaking the cycle of ever-increasing gas fees during congestion.
- Better Fee Estimation: The base fee adjusts algorithmically based on network demand, making it easier for users to predict appropriate fees.
- Reduced Congestion: A more efficient fee market could help mitigate network congestion, especially during periods of high demand.
The Path Forward: London Hard Fork and Community Tensions
During a core developer meeting on March 5, it was decided that EIP-1559 would be included in the London hard fork, tentatively scheduled for July. This decision appears to move forward despite significant opposition from the mining community.
As the Berlin upgrade completes, discussions and disagreements around EIP-1559 are likely to intensify. This highlights the ongoing challenge of balancing the interests of different stakeholders within a decentralized ecosystem like Ethereum.
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Frequently Asked Questions
What is the main goal of EIP-1559?
EIP-1559 aims to reform Ethereum's fee market by making transaction costs more predictable and less volatile. It introduces a base fee that is burned and an optional tip for miners, which should improve the overall user experience during times of network congestion.
Why are Ethereum miners against EIP-1559?
Miners oppose EIP-1559 because it burns the base fee portion of transaction costs, which could significantly reduce their revenue. Currently, miners earn all the gas fees from the transactions they include in blocks.
When is the London hard fork expected to happen?
The London hard fork, which includes EIP-1559, is currently planned for July 2021. However, dates in blockchain development are always estimates and can change based on testing and community consensus.
Will EIP-1559 reduce gas fees?
While EIP-1559 is designed to make fees more predictable, it does not necessarily guarantee lower fees. Its primary goal is to improve the fee market mechanism and user experience, especially during peak usage.
What happens after the Berlin upgrade?
After the Berlin upgrade is implemented, the Ethereum community will focus on testing and deploying the London hard fork. This includes continued debate and development around EIP-1559 and other proposed improvements.
Can EIP-1559 be implemented without a hard fork?
No, EIP-1559 requires a hard fork because it fundamentally changes Ethereum's transaction fee structure and consensus rules. All network participants need to upgrade their clients to support the new rules.