EIP-1559 (fee burn)

EIP-1559 is an Ethereum Improvement Proposal that changed how transaction fees work. It went live in the London upgrade on 5 August 2021.

Before it, users bid against each other in a simple auction, which made fees unpredictable. EIP-1559 introduced a base fee that the protocol sets automatically for each block, rising when blocks are more than half full and falling when they are less full. Users can add an optional priority fee, or tip, to get included faster. Crucially, the base fee is burned, permanently removing that ETH from circulation, while only the tip goes to the block producer.

The burn means ETH's net supply depends on network activity. During busy periods more ETH can be burned than is issued, making supply deflationary; in quiet periods supply grows. Wallets now show a "max fee" and "priority fee" rather than a single gas price. Other EVM chains, such as Polygon and BNB Chain, have adopted similar mechanisms.