EIP-1559 Explained: How Ethereum’s Fee Change Changed Crypto Forever

When you send ETH, you pay a fee. But before EIP-1559, a major upgrade to Ethereum’s transaction fee market introduced in August 2021. Also known as Ethereum Improvement Proposal 1559, it wasn’t just a tweak—it rewrote how fees work on the network. Before EIP-1559, users were guessing what fee to pay, often overpaying because the system was like an auction with no clear rules. Now, there’s a base fee, a dynamically adjusted fee that’s automatically calculated by the network and burned. This means the fee you see isn’t arbitrary—it’s math. And that burn? It destroys ETH instead of giving it to miners, making ETH scarcer over time.

EIP-1559 didn’t just fix fees—it changed incentives. Miners still get tips, called priority fees, optional payments users add to get their transactions processed faster, but the bulk of the fee now disappears into the ether. That burn mechanism is why people say Ethereum is becoming deflationary. In busy periods, like NFT drops or DeFi surges, the base fee spikes. In quiet times, it drops. No more guessing. No more wasted gas. And for holders, it means less inflation, maybe even less supply over time. This isn’t just about cost—it’s about value. The upgrade also made Ethereum more predictable for wallets and apps. Apps can now estimate fees accurately, reducing failed transactions. That’s huge for everyday users and DeFi platforms alike.

EIP-1559 didn’t solve everything. Gas fees still get high when the network is overloaded. But it made the system fairer, more transparent, and more aligned with long-term token economics. It also laid groundwork for future upgrades like sharding. If you’ve ever wondered why ETH prices reacted to network activity, or why some people say Ethereum is becoming a deflationary asset, EIP-1559 is the reason. Below, you’ll find real-world examples of how this change impacts users, exchanges, and even crypto tax strategies—because every fee burn has a ripple effect.