What it is
EIP-1559, or Ethereum Improvement Proposal 1559, is a significant upgrade to Ethereum's transaction fee market, implemented with the London hard fork in August 2021. Before EIP-1559, users bid directly in an auction for block space. This EIP introduced a hybrid fee system where each transaction includes a "base fee" that is burned, and an optional "priority fee" paid to validators. The base fee adjusts dynamically based on network congestion.
EIP-1559 made transaction fees more predictable and transparent for users by removing the direct bidding war. The ETH burning mechanism, where the base fee is removed from circulation, has made Ether a deflationary asset at times, impacting its supply dynamics. News coverage often focuses on the amount of ETH burned, which can influence market sentiment and ETH's valuation. It also affects validator revenue, as they now primarily earn priority fees and block rewards.
Why it matters
EIP-1559 changed how Ethereum transaction fees work and introduced ETH burning, affecting ETH's supply and price.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice