Ethereum fees on the rise as demand grows

Gaming and decentralized applications took the biggest hit from the rising costs. Crypto investor Ryan Sean Adams and Buterin called for urgent changes to address the problem. Games that relied on low-cost, high-frequency transactions saw activity plummet. In June 2020, gas prices jumped from 30 to 40 Gwei in a spike, then more than doubled over the next month and a half.

Buterin cited research from Princeton University that challenged the assumption that miners being paid through block rewards or transaction fees made no difference to blockchain security. He argued that the method of miner compensation mattered for network resilience. He proposed Ethereum Improvement Proposal 1559 to address the problem. The proposal would scrap the current first-price auction model and replace it with a dynamic fee mechanism that adjusts the base fee depending on network demand.

Under the new system, the network's capacity would expand to 16 million gas. The base fee would rise once demand reached 10 million. Miners would receive tips from users, but the base fee would burn instead of flowing to miners' wallets. This burn mechanism prevents miners from manipulating the base fee.

The implementation would unfold in two stages. The first phase would phase out legacy gas transactions while the new system came online. In the second phase, the network would stop accepting legacy transactions.