EIP-1559
An Ethereum upgrade that introduced a dynamic base fee for transactions, implemented in August 2021.
What is EIP-1559?
EIP-1559 (Ethereum Improvement Proposal 1559), activated on August 5, 2021, reformed Ethereum’s transaction fee market. It introduced a base fee, automatically adjusted based on network demand, which is burned (removed from circulation) to reduce ETH supply inflation. Users can add a priority fee to incentivize faster transaction inclusion. EIP-1559 improves fee predictability, reduces overpayment, and supports Ethereum’s economic sustainability. It also dynamically adjusts the block gas limit to manage congestion, enhancing user experience.
Related Terms
Gas (Ethereum)
A unit measuring the computational effort required to execute transactions or smart contracts on Ethereum.
Buy Walls
Large accumulations of buy orders at a specific price level, forming a barrier against downward price movement.
dApp (Decentralized Application)
A software application that runs on a decentralized network like Ethereum, leveraging smart contracts for backend logic.
Reserve Factor (Lending)
A percentage of interest retained by a lending protocol to fund operations or cover losses.
Liquidity Pool (DEX)
A liquidity pool is a smart contract on a decentralized exchange (DEX) that holds a pair of tokens, enabling automated trading and liquidity provision without traditional order books.
Margin Trading
A trading strategy in digital assets where investors borrow funds to amplify position sizes, increasing potential profits and losses through leverage ratios like 2x or 5x.