Trouble understanding the Ethereum EIP 1559 upgrade? Here's the simplest analogy for this yet!
Ethereum is burning $10,000 every single minute since EIP 1559 was deployed this afternoon, ahead of schedule. Today let’s take a look at why this upgrade was done, and what it means for you. Called the London Fork, think of this being the difference between a regular traffic intersection in India, and an intersection that is well-regulated with traffic signals. Previously, the blockchain struggled with transaction fees that were like chaotic intersections – users had to compete in a closed bid auction, guessing at what any miner would accept for processing their transaction. Now Ethereum will use an algorithm based on network activity, like a traffic signal, to decide what the transaction fee will be, ie who gets the green light and who has to wait. This not only stabilizes the fee, it also doubles the block size, allowing more transactions to happen, the way more traffic can flow when it is well-regulated.
Additionally, there is the
important Ethereum Improvement proposal, or EIP, number 3554, where there is a historic shift from the proof of work protocol which guzzles so much electricity, to the more efficient proof of stake. Here, instead of crunching a billion calculations, users verify transactions using their existing activity and stake. This EIP was originally scheduled for 2022, but has been moved up to December, encouraging miners to upgrade their software now!
