A First Look at Post-EIP 1559 Ethereum
At block 1,265,000, Ethereum pushed its London upgrade with the long-awaited EIP 1559. The upgrade went off without a hitch and had thousands tuning in to watch parties celebrating the occasion.
In this article we look at data from the blockchain in its first 2 days after London. Key highlights include:
- Burnt Fees
- Gas Prices
- ETH Inflation
- EIP 1559 Transactions
To check out live data by block, head to the Etherscan Blocks page!
Burnt Fees
The key metric in most people’s minds. In the first 2 days post-London, Ethereum has already burnt close to 9,200 ETH, approximately 0.01% of total supply. It has burnt ETH at a rate of 3.19 ETH per minute.
The 10 largest blocks burning ETH at the time of writing were all mined shortly after the upgrade. Continuing a trend prevalent throughout the last month, these congested blocks were caused by yet another NFT airdrop.
Gas guzzlers are contracts that consume the most gas due to their users’ interactions. After the London upgrade, they are also the largest burners of ETH. The top 10 entities to guzzle gas have burnt more than 4,500 ETH in the first 2 days since London.
Breaking these addresses down by type, we see that NFTs lead the way, followed closely by decentralized exchanges (DEX). These addresses make up more than 2/3 of top gas guzzlers burning ETH.
Providing an indication of a rollup/sidechain-centric future of Ethereum were the two bridge contracts of Polygon’s POS chain and Axie Infinity’s Ronin chain.
Conversely, gas spenders are entities that have spent and burnt the most gas. By far the leading ones are Binance and Coinbase. In total, the top 10 spenders have burnt close to 600 ETH in London’s first 2 days.
Looking at gas spenders by type, centralized exchanges dominate the pie, making up almost 90% of the top 25 addresses. Mining pools Spark Pool and Ethermine burnt a fair amount of ETH distributing mining profits to their miners, as they are now unable to do so by spending negligible gas prices.
Gas Prices
EIP 1559 changed the transaction mechanism in Ethereum from a first price auction to relying on a protocol base fee + user-selected priority fee. Etherscan users may have noticed this additional information displayed on the site.
The aforementioned NFT airdrop also had a significant impact on network base fees, becoming the first test case of the EIP 1559 flexible block size mechanism. Base fees spiked quickly up and back down as users rushed to claim their NFTs.
Contrary to a popular misconception, EIP 1559 does not necessarily result in lower gas fees (Etherscan readers know better though!). What it does is provide better gas price estimation by updating protocol base fees. It functioned as expected here, as base fees shot up from 97 Gwei to a high of 476 Gwei in 6 minutes and dropped back in 40 minutes.
Tied closely with base fees are miner tips or priority fees. These are the amounts of ETH actually sent to miners instead of burnt from the blockchain. Again indicating successful execution of the EIP 1559 mechanism, the chart below shows how protracted high priority fees led to the large spike in base fees while short bursts of it led to a limited or no impact.
ETH Inflation
Another popular misconception is that EIP 1559 necessarily results in a deflationary supply of ETH. Without the deployment of Proof of Stake (POS) and a subsequent drop in block rewards, Ethereum will overall remain inflationary. However, short periods with high base fees will result in a temporary deflation in ETH.
The first deflationary block in Ethereum was found an hour after London.
Depending on the amounts of ETH staked after the merge to POS and base fees, ETH supply may well become net deflationary. Ultrasound.money has a nice projection of inflation after the merge given a user’s selected parameters.
EIP 1559 Transactions
As most wallet providers have not switched to using EIP 1559-style transactions, they have made up less than 10% of transactions so far. A full analysis of EIP 1559 will likely be possible only after a majority of transactions have flipped from Legacy to EIP 1559.
Why should wallets and their users opt to use EIP 1559 transactions? Using this transaction type saves ETH for the user, following the formula:
(Max Fee Per Gas — (Base Fee Per Gas + Max Priority Fee Per Gas)) * Gas Used
COVIDPunks (culprit of the spike in base fees) were a primary beneficiary of these savings, experiencing the highest savings per transaction so far while minting new NFTs.
As mentioned, a full analysis of EIP 1559 is only fair to make after it has been adopted widely by wallets and users. This article is only a first look at the data. If you are interested to view more, check out our EIP 1559 dashboard and let us know what other metrics you’d like to see!
