Founders’ Ethereum Proposal to Make Network Faster

By We Play Coins
Added on Feb 05, 2020
Founders’ Ethereum Proposal to Make Network Faster

Founders’ Ethereum Proposal to make the network faster according to the ethereum github page. Vitalik Buterin and Eric Conner proposed to introduce a new system of mining to help improve the efficiency of the Ethereum Blockchain Network.

Mining in Ethereum is similar to Bitcoin and miners know this. For every block they add to the network, they get a percentage of Ether as a payment. The more transactions there are on the blockchain, the more the price of transaction increases. This is good in a way because it helps maintain the security of the blockchain. However, this also incentivizes miners to jack up the transaction rates and slow the network down. Buterin and Conner argue that if Ethereum transactions are split into 2 levels of BASEFEE and “PREMIUM”, they can solve this problem.

How would it work? Users who wish to transact can choose the speed at which they wish to have their transaction completed. If they want a faster speed, they must pay a premium transaction fees. If they do, then the BASEFEE is burnt off the network. This transaction would not affect the regular transactions and the miner would be compensated for the work. Also, the miner would not be incentivised to increase the BASEFEE transaction cost on the network.

Simple Summary

The current “first price auction” fee model in Ethereum is inefficient and needlessly costly to users. This EIP proposes a way to replace this with a mechanism that adjusts a base network fee based on network demand, creating better fee price efficiency and reducing the complexity of client software needed to avoid paying unnecessarily high fees.


There is a BASEFEE value in protocol, which can move up or down by a maximum of 1/8 in each block; initially, miners adjust this value to target an average gas usage of 8 million, increasing BASEFEE if usage is higher and decreasing it if usage is lower. Transaction senders specify their fees by providing two values:

A “premium” gasprice which gets added onto the BASEFEE gasprice, which can either be set to a fairly low value (eg. 1 gwei) to compensate miners for uncle rate risk or to a high value to compete during sudden bursts of activity. The BASEFEE gets burned, the premium is given to the miner.

A “cap” which represents the maximum total that the transaction sender would be willing to pay to get included.

An important aspect of this upgraded fee system is that miners only get to keep the tips. The BASEFEE is always burned (i.e. it is destroyed by the protocol). Burning this is important because it prevents miners from manipulating the fee in order to extract more fees from users. It also ensures that only ETH can ever be used to pay for transactions on Ethereum, cementing the economic value of ETH within the Ethereum platform. Transactions published before this EIP or by wallets that do not support this EIP will be interpreted by the above formulas as having a fee_premium of zero and a fee_cap of the fee that they submit.