EIP-1559, a proposal for Ethereum, has altered the fee structure of the network by burning the ETH used for transaction fees instead of allocating it to miners. This change aims to reduce the volatility of transaction fees.

EIP-1559 deviates from the first-price auction-based logic for calculating Gas fees. In the first-price auction model, the highest bidder wins, and users have to pay higher fees to incentivize miners to prioritize their transactions. This could lead to an infinite increase in Gas fees. Under EIP-1559, users are required to pay a fixed “base fee” for transactions. If they want miners to prioritize their transactions, they can add a “tip,” also known as a “priority fee.”

The relationship between the base fee and the tip can be likened to taking a taxi. For example, when taking a taxi from the office to home, you need to pay the basic fare for the journey. However, if you want the driver to prioritize picking you up, you can pay an additional dispatch fee. The driver is then more motivated to come to you. The dispatch fee to the driver is akin to the tip given to miners. In the case of ETH, the base fee generated from each transaction is destroyed, while the tip is paid directly to the miners.

This change in Ethereum’s fee model represents a significant shift towards a more predictable and user-friendly fee structure, potentially improving the overall user experience on the Ethereum network.