What Is EIP-1559?

EIP-1559 was a major update to Ethereum’s transaction fee structure, launched during the London hard fork in August 2021. It redesigned how gas fees are calculated and managed, making the system more predictable and efficient. The proposal also introduced a deflationary element to ETH’s supply by permanently removing a portion of transaction fees from circulation.

How Does EIP-1559 Work?

Base Fee System
Before EIP-1559, Ethereum used a first-price auction model where users competed by offering higher gas fees to get their transactions processed faster — often resulting in unpredictable and high costs during network congestion.
With EIP-1559, Ethereum adopted an adaptive model introducing a base fee that automatically adjusts based on network demand.

• When activity on the network increases, the base fee rises.

• When demand falls, the fee decreases.
  This mechanism helps stabilize transaction costs and makes gas prices more consistent for users.

Fee Burning
A key innovation of EIP-1559 is the burning of the base fee. Instead of all fees going to validators, the base fee is permanently destroyed, reducing the overall ETH supply over time and creating a deflationary pressure on the token.

Priority Fee (Tip)
Users can include a priority fee, also known as a tip, to incentivize validators to process their transactions more quickly. This optional tip is paid in addition to the base fee and goes directly to the validator who confirms the transaction.

Conclusion

EIP-1559 transformed how Ethereum handles transaction fees by introducing a flexible base fee and a deflationary burn mechanism. Users now experience more predictable costs and can still choose to add tips for faster confirmations, balancing fairness, efficiency, and long-term network sustainability.