By Yuga Cohler
TLDR: EIP-1559 transactions have allowed Coinbase and Coinbase users to save ETH on gas prices without sacrificing confirmation times. Coinbase has also burned a lot of ETH, permanently reducing the supply of the second largest cryptocurrency by market capitalization.
In legacy transactions prior to London, senders would specify a single gas_price they were willing to pay for their transaction, and miners would select transactions based on a first-price auction. With London, the gas prices that senders pay are in part determined by a block-to-block base_fee_per_gas, which rises and falls with usage of the network.
EIP-1559 transactions allow senders to specify two values: max_fee_per_gas and max_priority_fee_per_gas. The former is an upper bound on the total gas price the sender is willing to pay, while the latter is an upper bound on the gas price the sender is willing to pay to the miner of the transaction. The effective_gas_price, i.e. the amount that the sender actually pays, is then computed as:
The block’s base_fee_per_gas is burned, thereby making the native currency more deflationary and returning value to ETH holders.
We rolled out this change gradually so that we could compare the metrics of legacy and EIP-1559 transactions. Our findings were surprising:
Coinbase executes a large number of transactions on Ethereum to source liquidity and provide withdrawals for our customers, so these savings add up. As of September 27, 2021, Coinbase has burned 13,800 ETH, for an average of about 254 ETH per day. This means we save about 27 ETH per day on gas prices from EIP-1559 transactions. Seeing this data, we have rolled out EIP-1559 to 95% of transactions, preserving a small holdback for data collection purposes. We intend on eventually rolling it out to 100%.
The London upgrade was a remarkable achievement not just for Ethereum, but for decentralized financial networks as a whole. A diverse group of participants across the world came together to implement a complex shift in one of the core mechanisms that dictates market prices. We’re looking forward to continuing to work with the Ethereum community to push forward the cutting edge of DApps & DeFi, and usher in the new era of ETH 2.0.