Ethereum : Gas / EIP-1559

Gas

This refers to the value used for fees in Ethereum. The fee is calculated by converting the Byte Code that appears when the code in the Smart Contract is complied into the Gas value specified in the OP_CODE table.

 

Gas Limit(Used)

Gas Limit is divided into Block Gas Limit and Transaction Gas Used. Block Gas Limit means the sum of the total Transaction Gas Used in the corresponding block, and Transaction Gas Used is the total amount of Gas used in executing the corresponding transaction.

 

Gas Price

Gas Price is a value used to determine how quickly the transaction will be executed. The minimum Gas Price value changes dynamically depending on the network status.

 

EIP-1559

EIP-1559, implemented in August 2021, marked a significant upgrade for Ethereum by overhauling how transaction fees, aka "gas fees," are calculated and processed. Here's a breakdown of its key features and impacts:

Before EIP-1559:

• Auction-based fees: Users bid on gas prices, leading to unpredictable costs and favoring miners willing to accept lower fees, potentially delaying transactions.
• Volatile fee market: Difficulty estimating fees, discouraging casual users and hindering ecosystem growth.
• Miner-centric: Miners captured most of the fees, potentially impacting Ethereum's long-term value proposition.

EIP-1559 introduces a new fee structure:

• Base fee: A dynamic, algorithm-determined fee for inclusion in the next block, adjusting based on network congestion.
• Max fee: Users specify the maximum they're willing to pay, including a "tip" for miners for faster processing.
• Priority fee: Optional tip portion of the max fee to incentivize miners.
• Burn mechanism: Portions of the base fee are permanently burned, reducing ETH supply over time.

Impacts of EIP-1559:

• More predictable fees: Base fee provides a baseline, improving cost estimation and user experience.
• Smoother fee market: Dynamic base fee adjusts to demand, potentially decreasing volatility.
• Reduced fee capture for miners: Transitioning to a more predictable and value-driven fee model.
• Potential deflationary effect: Burning base fees can decrease ETH supply in the long run, impacting its value.

Overall, EIP-1559 aims to achieve:

• Fairer and more efficient fee market: Balancing user needs, miner incentives, and network stability.
• Enhanced user experience: Making fee estimation and transaction planning easier.
• Sustainable economic model: Introducing a potential deflationary mechanism for Ethereum.

https://www.youtube.com/watch?v=MGemhK9t44Q

Base Fee

This is the basic fee amount to be provided to miners. The next Base Fee is calculated depending on how many transactions were filled in the previous Block, and can increase or decrease by up to 12.5%.

 

Max Priority Fee

This is the amount of fee to be provided to the miner in addition to the base fee.

 

Max Fee Per Gas

This is the maximum Gas Price value that can be provided to miners.

 

Fee calculation

min ( MaxFee - BaseFee, MaxPriorityFee)