What EIP-1559 Changed, in Plain Terms

Before August 2021, Ethereum fees worked as a sealed-bid auction. You submitted a gas price, you did not know what anyone else had submitted, and you found out whether you had overpaid after the fact.

The upgrade replaced that with a protocol-set base fee plus an optional tip. Here is what actually changed.

Change one: the price is no longer guessed

The base fee is calculated by the protocol from how full recent blocks have been. It rises by up to 12.5 percent when a block is more than half full and falls by up to the same when it is less.

Because the base fee for the next block is deterministic from the current one, wallets can estimate cost accurately rather than guessing. The chronic overpayment of the auction era largely disappeared.

Change two: there is now a floor

You cannot pay less than the base fee. It is not a recommendation from your wallet, it is a protocol requirement, and a transaction offering less will not be included at any point.

This is why manually reducing gas below the suggested figure produces a stuck transaction rather than a cheaper one.

Change three: blocks became elastic

The target block size is half of the maximum. Blocks can be up to twice the target during demand spikes, with the base fee rising rapidly afterwards to bring demand back down.

The practical effect is that short spikes get absorbed rather than producing a fee auction, and sustained demand produces a rapidly rising base fee instead.

Change four: the base fee is burned

This is the part that gets the most attention and the least connection to fees.

The base fee is destroyed rather than paid to validators, who receive only the tip. That permanently removes ETH from supply in proportion to network usage.

During periods of high activity, the amount burned has exceeded new issuance, making the supply net deflationary in those periods. Whether that matters for the asset’s value is a separate argument from how fees work, and the two are frequently conflated.

What did not change

Fees are still not proportional to transaction value. They never were and this upgrade did not touch that.

Fees are still high on mainnet during demand. The upgrade improved price discovery. It did not add capacity. The answer to capacity is layer 2, not fee mechanics.

Failed transactions still cost money. Gas consumed is gas paid.

What it means when you look at a wallet today

The fee estimate you see is composed of a base fee you cannot influence and a priority fee you can. Speed settings in most wallets adjust only the second, which is why the difference between fast and slow is smaller than it used to be.

During quiet periods the tip is a small fraction of the total. During congestion it matters more, because competition for inclusion within the next block or two is real.

For anyone comparing the network cost against what a platform charges, venues that separate the two, such as platforms that do not round the fee up, make it possible to see which part of a withdrawal charge is the network and which is the business.