EIP 1559 brief explanation rant

Wrote this up in a discord chat and thought maybe some users here may enjoy, or perhaps add or correct any of it. so here goes:

Within defi you have this problem where transactions are time sensitive. So, in order to ensure that your $50,000.00 defi tx goes through, you take the highest gas price and even go over that. This ensures your tx will go through timely, and when you’re working with that much money, a $100.00 tx fee is worth it to ensure your tx goes through.

However, when you do that, you have now directly raised the highest gas price, and the NEXT defi user has to top YOUR tx fee.

The network ends up experiencing this “leapfrog” effect which spikes the price to crazy prices
and if you dont leapfrog, then your tx times out, you lose the price point and might lose much more than 100.00

So defi (not just defi, but in this example) causes these huge fluctuations; these fluctuations can revolve around crypto prices, too. So when you see a large price fluctuation, you can expect gas fees to increase as defi users try to get in or cash out.

eip1559 will help with this. The gas price will no longer be arbitrarily seen/set based on prices of gas on the previous block(s), but will be set based on historic price and block size/fullness averaged over X number of last blocks - I’m not sure on what x equals at this time, maybe someone else here knows.

Now, users can add a tip to move their tx to the top of the queue, BUT this tip will not directly effect the gas prices for future blocks in any way.

The mechanism setting prices will look like this:
If a block is full, the next block gas fee will be a little higher, and gas fees will go up block by block until, finally, it prices out enough users that blocks are no longer full; then, it will begin going back down. The market will eventually settle, and while there may be ups and downs, it will be more gradual and predictable.

So, thats it in a nutshell. EIP1559 will not directly address gas price problem, but does address the fluctuation problem which should help the gas price problem.


Great Explanation Thanks!

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