Eight major Ethereum mining pools (representing ~30% of the network's hash rate) and Flexpool have formed an alliance to oppose EIP1559—a controversial fee market overhaul proposed by Ethereum developers. This confrontation highlights growing tensions between miners and developers over transaction fee economics.
Understanding EIP1559: The Proposed Fee Market Reform
Traditionally, Ethereum miner revenue comprises:
- Block rewards (newly minted ETH)
- Transaction fees (gas payments)
Current Gas Fee Mechanism
- GasUsed: Measures computational resources consumed (e.g., CPU time)
- GasPrice: Price per unit of resource (set by transaction creators)
- Formula: Fee = gasUsed × gasPrice (analogous to fuel cost = liters × price/liter)
During network congestion (e.g., 2020 DeFi boom), auction-style fee bidding drove miner transaction fee revenue to 53.4% of monthly earnings—but created inefficiencies for users.
EIP1559's Key Changes:
- Base Fee: Dynamic per-block base fee (adjusted algorithmically, burned rather than paid to miners)
- Priority Fee: Optional tip to miners for faster inclusion
Fee Example:
- Old system: Miner receives 1.19104 ETH
- New system: 0.19104 ETH burned + 1 ETH miner tip → 24.7% reduction per transaction
👉 How Ethereum gas fees impact decentralized finance
Why Burn ETH? The Economic Rationale
- Supply Control: Creates deflationary pressure countering ETH's unlimited issuance
- Network Security: Enhances long-term token scarcity and security
- Holder Alignment: Benefits all ETH stakeholders, not just miners
Miner Opposition: The Stakes
With mining now a multi-billion dollar industry, EIP1559's fee reduction directly threatens profitability:
- **$4.6/GH loss** at current ETH prices ($1,293.95)
- 30% of hash rate actively opposing via Flexpool alliance
Mining Pool Positions:
| Pool | Stance | Notable Position |
|---|---|---|
| BitFly | ❌ Opposed | "Risks Ethereum's future" |
| F2Pool | ✅ Supports | Operates Eth 2.0 staking service |
| SparkPool | ⚠️ Mixed | Founder previously supported better fee design |
The Road Ahead: Potential Compromises
While developers view EIP1559 as critical for sustainable growth ("the final piece of Ethereum's monetary policy"), miners' infrastructure investments may push both sides toward middle-ground solutions.
Key Considerations:
- Berlin hard fork (Q1 2025) could include EIP1559
- Mining profitability impacts must be balanced with network usability
- Alternative fee models remain under discussion
👉 Ethereum's roadmap for scalability solutions
FAQ: EIP1559 Clarified
Q: Will EIP1559 eliminate miner revenue?
A: No—it reduces (but doesn't remove) fee income while maintaining block rewards.
Q: How often does the base fee adjust?
A: Dynamically per block based on network congestion.
Q: Can miners veto EIP1559?
A: Technically yes via hash power, but developer consensus carries significant weight.
Q: Does burning ETH benefit holders?
A: Yes—reduced supply can increase scarcity and potential value.
Q: What's the timeline for implementation?
A: Possibly mid-2025 after Berlin hard fork testing.