Alright folks, welcome to this Monday version of Crypto AMA. Today
we're doing a 1-hour session on EIP 1559 with @timbeiko@gakonst and @hasufly
— thanks for coming on!
Guys, can you tell us a little bit about each of your respective
backgrounds as well as your work/expertise on today's subject
We'll then dive right into questions
Hi everyone, Spencer, thank you for having us. In the past I operated
as an independent consultant, working on L2 scaling, security auditing
and zero knowledge proofs. Currently, I am a Research Partner at
Paradigm, working closely with our portfolio companies, while also
doing broader work on subjects that I believe to be impactful for
Ethereum and Bitcoin, such as EIP1559.
My full time role is as a PM for Hyperledger Besu,
ConsenSys’s Eth1 client.
As part of that, our team decided to “revive” the work on EIP-1559
earlier this year (right after EthCC). Since then, we’ve implemented
it in our client, and I’ve been acting as a sort of “unnoficial
project manager” to help coordinate the implementation, R&D work,
funding and public comms.
Hi, I'm an independent researcher and writer in this space (as
in, not affiliated with any particular project). Currently, I run the
research desk for Deribit, the largest options exchange. Most of my
previous research was focused on the economic security of public
blockchains. I immediately took an interest in EIP-1559 because it
represents the intersection of all my interests (security, economics,
game theory, mining, fees...)
(sorry for the slow reply, will be faster now)
Cool, thanks guys!
Questions good to go
@timbeiko let's start with
you: for those of us who have been preoccupied with the latest emoji
farm, what's the latest update on EIP-1559? Have there been any
material changes over the last few months? When do you think it will
For updates, we now have two client teams working on implementations
of the EIP (Besu & Vulcanize, the latter which is working on
Geth). Alongside that, research is being done to determine whether
EIP-1559 is game theoretically sound (Tim Roughgarden, a Columbia
CS/game theory professor has now been contracted to to so) and the EF
is working on simulations of the EIP.
What are the major outstanding economic questions associated with
With regards to material changes, there have been a _lot_ of proposals
over the past few months. Some have been pretty minor technical
minutiae while others have been broader potential changes based on
UX/community feedback/etc. Before we commit any large changes, we’re
trying to rech out to as many folks in the community to better
understand the impact 1559 would have on their project. Shameless plug
here 😄 https://forms.gle/3Jd4JpQgh3ZCfP3bA
What is the greatest level of precision (in terms of % of block reward
emissions) that you think something like EIP-1559 can correct for? One
simplistic way to view the burns is as corrections for over/under
issuance based on demand, and I’m curious if you think the mechanism
can be made very precise or has limits to how well it corrects (a la
I think the big question is "is this mechanism
incentive-compatible". as in, assuming people are rational, does
it achieve its stated design goals?
Many people with a
fundamental grasp of game theory and mechanism design have looked into
it and not found any major issues, but we also find it extremely
valuable to now have Prof. Roughgarden perform a formal analysis and
give the final ok.
tldr: are there are no known outstanding
issues, but there might be unknown ones.
His work on game theory & auctions has _created_ a new field
called "algorithmic game theory" which has applications from
resource allocation in large networks, to online advertising. It is
incredibly exciting to see such a figure be interested in our space.
He's also done previous work in crypto on finding
optimal/incentive compatible reward payout functions for mining pools,
For timelines, this is always tricky! What I’m personally aiming for
is “the fork after Berlin” (current fork being planned for Ethereum).
Not sure I’m willing to commit to more than that 😅
for getting the work started right after EthCC was to make sure that
1559 would ideally land _before_ other major changes proposed as part
of Eth 1.x (i.e. statelessness). This would make 1559 easier to ship
because both proposals won’t have to keep adapting to each other.
Agreed with this. In addition, I think the simulations will improve
our understanding of the soundness of the mechanism, but in the end
we'll need to 1) get formal results around its incentive
(in)compatibility and 2) see how it does in a live (incentivized)
I think this is somewhat accurate: By "correcting over/under
issuance" via the burn, you're adjusting the security budget
of the system depending on demand.
Are there any new/old attack vectors introduced/amplified by eip1559
that could cause a non-negligible systemtic threat that you're
aware of? If so, what's the most important eip1559 security
"FUD" to track?
thoughts on the fee-war being replaced with a tip-war?
Not sure that I understand the first part of your question, but agree
that the burn can be seen as a correction for both over- and
underissuance of block rewards to miners.
The reason it can be
seen that way is that EIP-1559 combines well with a perpetual block
subidy, which is the most stable incentive to miners (compared to txn
fees, which can create incentives for fee sniping and chaintip
With a perpetual block subsidy + fee burn you can
ensure that miners earn *at least* x% issuance per year, but not much
more (since most of the fees are burned).
The only way known to
me how you would fine-tune the issuance further is by raising or
lowering that subsidy, not really tinkering with the fee burn.
ELI5: what does EIP1559 (in its current state) mean for the UX of your
average Metamask user?
How and when does the work on EIP-1559 intersect with the Ethereum 2.0
Due to the BASEFEE overshooting very quickly, it is not sustainable to
have tip auctions for long durations. So there most definitely will be
tip wars, but we expect them to not be happening consistently, UNLESS
they're done in order to frontrun others' transactions e.g.
in arbitrage opportunities
Open to suggestions here, but the way we are going about it is by
having gradually more complex testnets. Right now, we’re just testing
consensus across 2 implementations on a PoA network, next step would
be testing on a PoW network and spamming it with a ton of txns to see
how clients react, then I think we’ll need to test on a network with a
large existing state (probably Ropsten) to see how “bad blocks” can
affect the network.
In parallel to that, there is obviously
the R&D work mentioned earlier going on.
EIP1559 introduces tips on top of a base fee, so now instead of users
just cranking up the gas price to get their tx included in the next
block, they can add a tip on top of the base fee, which on first
glance appears to just defer the problem
If we are talking about priority gas auctions (PGAs), so multiple
people bidding to get the same transaction included, or people trying
to get mutually exclusive transactions included, the answer is 100%.
auctions will continue to happen in any block, no matter how full, but
shouldn't really affect other users further down in the block who
are willing to pay the basefee.
I do not know what the expectations were, unfortunately testnets on
nacent networks with little to no users tend to be "empty"
most of the time, which kind of defeats the purpose of EIP1559 (since
it requires some actual demand). You can see how the BASEFEE behaved
here, and it was mostly at 0.
I think that it doesn't need to be "spammed" with
transactions, on the contrary we must define a few demand
distributions based on empirical data (e.g. seasonality due to
timezones and demographic of ethereum users) and see how the BASEFEE
behaves depending on them
Right now they are pretty separate. There is a desire to have
1559-style fees in Eth2 but I’m not aware of any formal spec or
implementation yet. I think it’d be good to see how it performs on
Eth1 to inform the Eth2 design!
to expand on this a little bit, the reason that paying the basefee +
min tip is almost always enough to get into the block is that EIP-1559
introduces a flexible blocksize. Instead of a single hardcap, there
is now a target blocksize (same as today, 12.5m gas) and a max
blocksize of twice that (so 25m). The basefee moves up and down in a
way so that blocks are always on average 50% full. Therefore, there is
always extra room for someone who is willing to pay that basefee.
The "pop-up -> click -> wait" flow of Metamask will
not change. Due to how fee estimation is simplified (on the
application level), we expect that fee volatility will be reduced and
you'll be paying less fees as a result.
@jessewldn here are some mocks
the MetaMask team had put together a while back.
^ But these are for the "advanced" view, ideally you'll
never have to use them
That’s right ^
Cool, thanks. Sounds like its mostly behind the scenes, but ideally
with volatility reduced, there'll be fewer instances of failed
txs, or txs you need to speed up
the need to speed up txns should be significantly reduced, as you can
very safely "overbid" for the transaction in the sense that
you define a margin of safety, but you never pay more than everybody
else. So choosing a high margin of safety is actually a low risk.
Curious if anyone on the research side can chime in on Eth2 1559-style
You get an EIP1559 market per shard is the last story I heard, but I
don't think there's anythign super concrete
There's a Github iIssue with Justin Drake and Dankraad Feist
discussing it IIRC (looking for it now), but there's no
specification or concrete plan around it. It's a "we want it
to happen" thing, but TBD
Are miners’ revenunes adversely effected by 1559? What has been the
reception from the mining community?
Are there constraints that the EIP1559 team currently struggles with
that could be solved with more funding?
What is the impact on the overall throghput of Ethereum?
Long term the blocksize is the same, you're targeting 50%
utilization of the 2x new total. So if blocks are 10m gas today,
EIP1559 makes them 20m gas but targeting 50% utilization. You just
have some slack which allows you to improve the fee situation. So
it's not a blocksize increase per-se, if you zoom out enough
Fees are currently a signficant (I think >50% of the entire mining
reward even?) part of overall miner revenue. Post-1559, the basefee
part of the fee would be burned instead of going to miners.
would still get the tips, which would be more than most people would
believe. The reason that tips will still be significant is that PGAs
still take place in every block as arbitrageurs bid for priority. So
most revenue from arbitrage still goes to miners post-1559
On this note, one of the points brought up when discussing EIP1559 is
the possibility of introducing perpetual block rewards and therefore
circumventing the insecurities that come with the opposite. How are we
thinking about block rewards moving forward?
For validation costs, there aren’t really any impacts on a fresh sync
(because even if you have a bunch of full blocks that are 2x the size
of our current ones, it’s only like if you added those blocks to the
tip of the chain, in a way). If you are at head and syncing each block
as it comes, then yes, some blocks could take 2x longer to
validate/propagate and this could increase the risks of certain DoS
attacks. One EIP that’s being put forward to reduce those risks (prior
to 1559 going live) is EIP-2929: https://github.com/ethereum/EIPs/blob/master/EIPS/eip-2929.md
The current consensus in Ethereum is to introduce perpetual block
rewards (or rather, keep them, since Ethereum currently has no halving
schedule). I'm personally a big believer since a block subsidy
generates very predictable and stable incentives for miners and hence
consensus stability and confirmation times.
The testnet will tell, this is the kind of thing where you stress
test. & see what happens
Are the 2x burst rates being considered in the light of selfish
Does it make selfish mining easier during periods of congestion?
You mean due to the fact that propagation becomes worse?
I think this is correct, any deterioration in block propagation means
that there's better opportunities for selfish mining. The
counterpoint is that you won't get 100% utilization blocks for
insanely long periods of time due to the basefee rapid overshoot
(I understand that my "basefee overshoots fast which means you
can't be at 100% for too long" point might be a little
e.g. if yield farming opportunities are providing you enough profit,
you may end up using the chain even with BASEFEE=1 ETH
The basefee though ends up increasing by 12.5% each time, in my sims
fees quickly went to thousands of dollars when there was lots of
demand, which you'd expect would throttle demand heavily
I'm adding this as a sidenote, but >50% of the skepticism
around 1559 is in some shape or form related to the question if the
proposal doesn't try to achieve too many design goals at the same
time. Usually followed by demands to unbundle it into several
One of those would be a standalone
elastic blocksize mechanism. But David's question actually shows
why you can't have elastic blocksizes without a way of charging
miners for making them. Otherwise, larger miners would have an
incentive to make larger blocks all the time to de-facto selfish mine
by increasing the propagation time of their blocks.
solves that with the basefee, a way for miners to pay for larger
blocks, but only if they can directly recoup the cost from users.