Recently, I rewatched the entire story of Ethereum's EIP1559 upgrade and realized how many interesting power struggles and misunderstandings are hidden behind this technological reform.

First, let's talk about why EIP1559 was needed. Like Bitcoin, Ethereum is limited by block capacity—Bitcoin can only process about 7 transactions per second, and Ethereum around 15. When transaction backlog exceeds the limit, miners will prioritize packing higher-fee transactions. It sounds reasonable, but in practice, it causes huge trouble for users. When you send a transaction, you have no idea how much fee to pay; you can only see what others are paying and bid slightly higher. This market mechanism forces everyone to predict how congested the blockchain will be, which is very exhausting. Moreover, when everyone rushes to send transactions, fees are ruthlessly driven up, and all these skyrocketing costs go straight into miners' pockets, leading to inefficient resource allocation in the ecosystem.

Another problem is the inflexibility of block resources. The amount of transactions a block can hold is fixed, but demand fluctuates—usually busier during weekdays than weekends, and especially crowded late at night in Asia. Occasionally, sudden events like NFT drops cause transaction fees to explode instantly, making it feel like the blockchain has come to a halt for ordinary users.

To solve these issues, the development team went through several conceptual evolutions. Initially, they considered using a "second-price auction," where regardless of how much you bid, all transactions in the same block pay the same fee, determined by the lowest bidder. This way, users wouldn't need to carefully calculate; they could just bid their maximum willingness to pay. But this approach had a clear flaw—miners could manipulate it. They could replace low-bid transactions, create fake high-fee transactions to inflate the minimum fee, and ultimately pocket the extra fees themselves.

To prevent miner manipulation, the most straightforward solution was—simply burn all the fees. Miners paying out of pocket to subsidize high fees would only lead to losses, so no one would want to play that game.

EIP1559's final, more elegant solution was to automatically adjust fees based on demand, turning the original block size limit into a target twice as large. If the target is 15 million gas, the cap becomes 30 million gas. Miners can still fill the block as they wish, but how full the block is will determine the system fee for the next block, with a ±12.5% adjustment per block. For example, if the base fee is 20 Gwei and the block is exactly half full, the next block's fee remains 20 Gwei; if the block is empty, the fee drops to 17.5 Gwei; if the block is full at 30M gas, the fee rises to 22.5 Gwei. This design greatly reduces miners' manipulation space and gives the blockchain flexibility to handle sudden high demand—temporarily processing transactions at twice the normal speed, with fees rising quickly but gradually decreasing during off-peak times. However, EIP1559 still retains the "tip" mechanism, allowing users to pay extra to speed up transactions in extreme cases.

The community's reaction to this upgrade was quite mixed. Miners were especially unhappy. Remember, 2020 was the breakout year for DeFi liquidity mining, with transaction demand soaring, fees often exceeding hundreds or even thousands of dollars, and miner revenue shifting from 5-10% of fees to a 1:1 ratio with block rewards, even surpassing it. Suddenly proposing to burn fee income was a huge blow to miners. They flooded social media with complaints, accusing developers of money-grabbing and claiming it would harm security (in reality, high fee ratios could cause chain reorganizations). Major mining pools even called for hard forks to resist the change. But by then, Ethereum had a robust DeFi ecosystem with anti-fork measures, the beacon chain was running, and PoS was ready to launch—what's a hard fork to them?

Another interesting battleground was the Ethereum Twitter influencer circle. In the past, Bitcoin fans often mocked Ethereum for lacking a fixed supply, saying no matter how impressive it is, it's just printing money. Now, the situation has flipped—if EIP1559 can make ETH deflationary, isn't that even better than Bitcoin's fixed supply? So many Ethereum influencers started hyping the "ultrasound money" concept, adding bat and sound emojis next to their profile pictures, claiming ETH will definitely soar, with DeFi, 2.0, and deflationary dynamics pushing its market cap to surpass Bitcoin someday.

But there's a big problem—EIP1559 doesn't actually guarantee deflation. While transaction fees are burned, block rewards still create new coins, and the final outcome depends entirely on the ratio of these two. Long-term, the most stable scenario is a fluctuation between inflation and deflation. Some sober voices popped up to burst the bubble; for example, the founder of MyCrypto publicly advised influencers not to mislead people, emphasizing that Ethereum is already excellent and there's no need to hype it with false deflationary fantasies.

Regarding the actual impact of EIP1559, honestly, its effect on price is uncertain. But on the technical side, some changes are clear. Some teams had been researching fee-less transactions at 0 gas, but after the upgrade, that became impossible because the system enforces fee collection. A more practical change is that fee setting has become automated—users no longer need to monitor the mempool; just reference the previous block's fee and add a little, making it easy to get transactions included in the next few blocks. Of course, if you want to save money and wait patiently, you'll need luck.

Looking back at the whole story, the most interesting part of EIP1559 isn't whether it causes deflation but how it reveals the real power struggles within an open ecosystem—miners' economic dilemmas, community narrative wars, and developers' pragmatic attitudes. These conflicts and compromises are what make the blockchain world most worth observing.