Before August 5, 2021, paying for an Ethereum transaction felt like bidding in an auction you didn’t fully understand. You’d open your wallet, see gas prices jumping from 50 gwei to 300 gwei in minutes, and guess how much to pay. Too little? Your transaction sat stuck. Too much? You overpaid by half or more. That chaos ended with EIP-1559 - a quiet but massive upgrade that didn’t just tweak gas fees, it rewrote the rules of how Ethereum charges for space on its blockchain.
What EIP-1559 Actually Did
EIP-1559 didn’t promise lower fees. It promised predictable fees. Before this upgrade, every transaction competed in a first-price auction. If you wanted your transaction confirmed fast, you had to outbid everyone else. That meant fees spiked during NFT drops, DeFi rushes, or simple network congestion. Users were flying blind.
EIP-1559 replaced that with two clear parts: a base fee and an optional priority fee (or tip). The base fee is set automatically by the protocol. It goes up when blocks are full and drops when they’re empty. It’s calculated using a simple formula: if a block uses more than 15 million gas (half the block limit), the base fee rises by up to 12.5%. If it’s under, it drops. No guesswork. No bidding wars.
Here’s the twist: the base fee doesn’t go to miners. It gets burned - permanently destroyed. That’s a huge shift. Before, miners got all the fees. Now, they only get tips. And the network? It’s slowly eating up ETH.
The Burning Mechanism That Changed ETH’s Supply
By burning the base fee, EIP-1559 turned Ethereum from an inflationary asset into a deflationary one. That sounds technical, but here’s what it means in real terms:
- Before EIP-1559, Ethereum issued about 4.4% more ETH per year.
- By December 2025, over 5.1 million ETH had been burned - equal to 4.28% of the total supply at the time of the upgrade.
- On 38% of days between August 2021 and December 2025, more ETH was burned than created. That’s net deflation.
On November 9, 2021, Ethereum burned 17,705 ETH in one day while only minting 13,500. That’s a net loss of 4,205 ETH. For the first time, ETH was becoming scarcer. This wasn’t marketing. It was math. And it changed how investors saw Ethereum. Grayscale reported a 22% jump in ETH investment products in Q4 2021, citing “improved monetary policy clarity.” Institutions finally had a clear story: ETH isn’t just a currency - it’s a scarce digital asset.
How Fees Work Now - The Two-Part System
Today, when you send ETH, your wallet shows you two numbers:
- Max fee per gas: The most you’re willing to pay total.
- Max priority fee per gas: The extra tip you’re willing to give miners.
Your wallet calculates the base fee automatically. If the base fee is 10 gwei and you set your max fee at 20 gwei, you’ll only pay 10 gwei for the base - and your extra 10 gwei goes to the miner as a tip. Any leftover? Refunded. No overpayment.
Before EIP-1559, users overpaid by an average of 28.7% during congestion. After? Consensys found overpayment dropped by 63% in the first six months. Wallets like MetaMask saw a 42% drop in support tickets about gas fees. People weren’t confused anymore. They were just paying what they needed to.
What About Peak Congestion? Did Fees Drop?
Here’s the myth: EIP-1559 made fees cheaper. The truth? It made them more predictable. During the December 2021 NFT boom, base fees spiked to 150 gwei. That’s still expensive. But before EIP-1559, fees hit 1,500 gwei. The spikes were wilder. Now, they’re controlled. You know what to expect.
Miners lost a big chunk of income. Ethermine reported a 35-45% drop in fee revenue right after the upgrade. But they still got tips. And as network usage grew, total revenue stabilized. The trade-off was clear: less volatility, less direct income, but more stable long-term demand.
Who Benefited? Who Lost?
Users: 68.3% of users surveyed on Reddit said fee predictability improved. MetaMask’s UX team confirmed fewer confused users. Most people didn’t need to change how they transacted - just understand two new numbers.
Miners: They lost base fee revenue. But they gained more consistent traffic. The shift forced them to adapt, not collapse. Today, miners earn less from fees, but more from block rewards and higher ETH prices.
Developers: dApps had to update. Wallets had to rework their UI. But once done, the system became far more reliable. JPMorgan’s Ethereum-based JPM Coin saw a 37% drop in transaction cost volatility - a big win for enterprise use.
ETH holders: The burning mechanism turned ETH into a deflationary asset. That’s not a feature - it’s a fundamental shift in value. ETH is no longer just “digital gold.” It’s digital gold with a built-in supply reducer.
The Bigger Picture: EIP-1559 and Ethereum’s Future
EIP-1559 wasn’t just about gas fees. It was about preparing Ethereum for scale. The Merge in September 2022 cut ETH issuance by 90%. EIP-1559’s burning mechanism made sure that even with lower issuance, ETH could still become deflationary. In 2023, Ethereum had 187 days of net deflation - meaning more ETH was destroyed than created.
Future upgrades like danksharding will increase block capacity tenfold. But EIP-1559’s base fee algorithm is already designed to handle it. Analysts at Delphi Digital predict it could reduce average fees by 90% post-danksharding - not because it’s cheaper now, but because it’s built to scale.
Still, challenges remain. Some users still don’t get why there are two fee parameters. Reddit threads from January 2022 still ask: “Why do I need to set maxFee and maxPriorityFee?” Wallets are slowly improving UIs, but education lags.
And as Ethereum scales to 100,000+ transactions per second, the 50% target utilization might need tweaking. Ethereum researcher Barnabé Monnot warned in late 2024 that the current target could become outdated. But that’s a good problem to have - it means the network is working.
Final Verdict: A Success Beyond Expectations
EIP-1559 didn’t just fix a broken fee system. It redefined Ethereum’s economic identity. It turned a chaotic, unpredictable cost into a transparent, self-regulating one. It made ETH scarcer. It gave users control. It gave miners stability. It gave institutions confidence.
By December 2025, 87% of Ethereum contributors surveyed called EIP-1559 “one of the most successful protocol upgrades in Ethereum’s history.” That’s rare. Most upgrades are technical tweaks. This one changed the money.
It didn’t make gas fees cheap. But it made them fair. And that’s worth more than any price drop.
What is the base fee in EIP-1559?
The base fee is the minimum amount of ETH required to include a transaction in a block. It’s automatically calculated by the Ethereum protocol based on how full the last block was. If blocks are over 50% full, the base fee increases. If under, it drops. It’s burned - not paid to miners - making it a deflationary force on ETH supply.
Does EIP-1559 reduce gas fees permanently?
No, EIP-1559 doesn’t guarantee lower fees. It guarantees more predictable ones. During high demand - like NFT drops or DeFi surges - base fees still rise. But they rise smoothly, not chaotically. Before EIP-1559, fees could jump 10x in minutes. Now, they adjust gradually, so users can plan.
Why is ETH being burned?
The base fee from every transaction is burned - permanently removed from circulation. This reduces the total supply of ETH over time. Since August 2021, over 5.1 million ETH have been burned. This turns ETH into a deflationary asset, especially during periods of high network usage, which makes it more valuable to holders.
Do miners still earn from EIP-1559?
Yes, but less than before. Miners no longer get the base fee. Instead, they earn only the optional priority fee (tip) that users add to speed up their transactions. While their total fee income dropped by 35-45% right after EIP-1559, higher network usage and rising ETH prices helped offset the loss.
What’s the difference between maxFeePerGas and maxPriorityFeePerGas?
maxFeePerGas is the maximum total fee you’re willing to pay per unit of gas. maxPriorityFeePerGas is the extra tip you’re offering miners on top of the base fee. Your wallet subtracts the base fee from your maxFeePerGas and uses the rest as your tip. Any leftover amount is refunded to you - so you never pay more than you set.
