Vitalik Buterin is looking at reforming the transaction fees in Ethereum so as not to impair the network security due to rising transaction fees.
In Proof-of-Work, miners rely on transaction fees when choosing what transactions to broadcast. While this could be good, Buterin thinks otherwise. According to the Ethereum founder, relying on transaction fees will incentivize selfish miners to bid for greater returns.
Transaction fee revenue is now nearing half as high as block reward revenue. This actually risks making ethereum *less* secure because of https://t.co/Dase8SL30z. Fee market reform (ie. EIP 1559) fixes this; another reason why that EIP is important. pic.twitter.com/eqU3tAMh67
— vitalik.eth (@VitalikButerin) July 21, 2020
Buterin cited a paper written by Princeton University researchers who concluded that reliance only on transaction fees will risk disruptions on the way transactions are being processed. Earlier, there were reports of high transaction fees in the Ethereum network, prompting some figures, like Ryan Adams from Mythos Capital to beget more values in each block.
Adams said he is frustrated that it’s now a “100 gwei world” in Ethereum. This, despite no retail fomo as of yet. Adams thinks DeFi rollups and wallets that support layer 2 could prove helpful.
Buterin is of the opinion that the current way of things will enable selfish miners to do selfish mining practices and may even fork the “wealthy” blocks to steal rewards.
Instead, Buterin urges the community to adopt the Ethereum Improvement Proposal (EIP) – 1559. This EIP proposes a base fee that will automatically adjust according to the Ethereum network’s congestion level. In this way, a market rate will be provided instead of users just referencing prices that are paid.
Miners will be able to keep the tips paid so that they prioritize the transactions, while the base fee will be burned. The burning will naturally lead to deflation because of the decreasing supply of Ethereum. However, this deflation could also be insignificant because of the upcoming Ethereum 2.0, which has a completely new mining principle.
However, the replies to Buterin’s tweet suggest the lack of consensus to push through with EIP-1559. Nick Johnson, creator of the Ethereum Name Service criticized the lack of any formal analysis that shows 1559 will behave as intended. Buterin replied that he would rather see a highly active testnet use 1559.
At the moment, there is an open request for funding on Gitcoin for a group of Ethereum developers to work on the 1559 proposal. The proposal reads, “EIP-1559 will help make transaction fees more predictable on the network, and ensure ETH’s economic value is enshrined at the protocol level.” Angel Investor Paolo Rebuffo said those ‘etherians’ who complain about gas fees should fund the 1559 research. “Put your money where your mouth is,” he tweeted.
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