Can ETH Become DEFLATIONARY? EIP 1559 Explained

[@Finematics]

❓What do you think about EIP 1559? Will it have an impact on the ETH price? 👍Hit the like button if you enjoyed this video 🐦Follow Finematics on Twitter ► twitter.com/finematics 💛Support Finematics on Patreon and join our Discord community ► www.patreon.com/finematics

[@phonsina3809]

@@שמואלדישראלי-ב2י popping oo

[@phonsina3809]

Eeeeeeeeeeee

[@ashtongrist]

I hate doodle videos

[@zainy7353]

finally someone who actually puts effort into the videos

[@Finematics]

thanks! :)

[@RanchHandFencing]

Ethereum Classic

[@falxie_]

This is one of the most accessible explanations that I've watched. I think that it's going to have some trouble from miners like myself

[@nukkythompson419]

get a day job and it won't matter

[@tspirit99]

Miners are thieving bastads!

[@matthewlebron142]

I don’t mine personally, I wish I knew how to with all the techno stuff, I just know how to buy some crypto lol but I do know one thing; albeit the general public do make the ethereum network as a whole, miners are the core , they are the ones confirming every transaction. Big shout out to all the miners out there for helping to build the foundation of every useful network there is now 👍🏽

[@1821-p6m]

@@tspirit99 without miners crypto wouldn't work though...

[@joecrofternap]

I am instant fan of this whiteboard format.. keep it up and i will spread to my 10000+ community also..

[@Finematics]

Awesome, thank you! :)

[@D_Ladybug]

Patrick Collins students attendance, mark present here...

[@Cat_Chronicles1]

present

[@akiluyiolamide2849]

Present

[@aloysiusemmanuel5756]

Present

[@mich_thedev]

Present

[@NosakhareKingsley]

present

[@dreamzsiva]

This channel is a goldmine of DeFi information. As a noob in crypto trading, I find these videos incredibly useful.Thank you for making these.

[@Finematics]

Thanks! :)

[@RanchHandFencing]

Do you mine any Ethereum Classic? ETC just did their Magneto upgrade yesterday.

[@MaxPicAxe]

First time someone has actually properly explained this to me, thanks

[@myanimebase6486]

Here from the Patrick's blockchain course lol

[@DarisaRohith]

There seems to be a fundamental mistake - EIP 1559 proposal makes it Deflationary, in general. irrespective of whether the following equation you mentioned holds - "Block Reward + Miner Tip < Burnt Base Fee". In simple the total supply is shrinking, because of which there would be shrinking in the total supply of ethereum in general. In a way better to logically consider - "Block Reward < Burnt Base Fee", cause the Miner Tip is actually in Eth circulation.

[@jabrowski_]

This is a great video bro all this time later. Ty. Liked and subbed

[@Finematics]

Thanks for the sub!

[@JinKee]

I love your voice. You're like the Two Minute Papers of crypto.

[@MaxPicAxe]

Haha nice observation

[@AaronMartinProfessional]

Hahaha True

[@gabriel9668]

Very well explained video. Love it!

[@mikelajackson9763]

Your videos are absolutely brilliant!

[@paul-olof]

Thank you for this. Very well put together and easily understood.

[@carlosparati6345]

thanks for the video!

[@Cryptokittty]

Your explanation of NFTs was so helpful; I’m excited to learn more.

[@xisense1101]

i saw you in some of the other blockchain video comments, i have also just started learning blockchain and happy to see people being consistent, keep going cryptokittty :)

[@TheNewTravel]

tldr: hodl

[@switchbranch8411]

Exactly. Looks as though eth is the new oil

[@racheldelorme6699]

HHOODDDLLLLLLL

[@petermorris1769]

Thanks for making this video! I now understand more, but I don't feel I understand enough to put this into code. Would it be possible for you to explain the steps? For example 1: Get the latest block 2: Get the value XXX 3: Get (some other value) 4: Add XXX to (some other value) 5: Store that value in the new transaction's ZZZ property. If someone can explain these steps to me, I would appreciate it very much!

[@Brunela111]

good video thanks!

[@GishStyle]

11:50 Correction: It would be deflationary if (block_reward < base fees). Miners tips don't affect the supply.

[@Finematics]

well spotted!

[@RaidenFrancois]

Thank you for putting this up! Appreciate the effort!

[@Finematics]

thanks!

[@vibhxs1942]

Thank you for the education

[@user-or7ji5hv8y]

Great explanation

[@arjoon]

Love your videos that aren't defi related as well, helps with getting a more holistic view.

[@Finematics]

Thanks! Yes, always good to get a more holistic view

[@avr1444]

Quite good videos. Thank you.

[@ericnordelogaliano3239]

Dude, where were you all this time? :), thanks for making this videos

[@sob3ygrime]

Great video!

[@wellswatti]

Excellent video. Wasn't involved with web3 before this was implemented on mainnet but great to get into how much more improved the network is thanks to this.

[@risssing]

EIP-1559 does not directly change the maximum gas limit per block, instead, it introduces a new fee structure to improve transaction fee predictability. Increasing Ethereum's network capacity, which is a separate topic addressed through other EIPs. For example, EIP-3198 proposes a mechanism to query the current gas limit, and EIP-3200 suggests a way to adjust the gas limit dynamically based on network conditions.

[@voornaamachternaam9218]

Your content is always amazing. Thank you for making this!

[@Finematics]

thanks!

[@sapster1337]

You shouldn't add the miner tip here 11:54 it doesn't contribute to inflation

[@AndrejAntonov]

I guess the same. "tip" should not matter in correct formula

[@Finematics]

thanks, you're right, it was noticed earlier and I corrected it in the article

[@Vlad-ld9cu]

High quality explanation, thank you so much.

[@Finematics]

You're very welcome!

[@codyswartz997]

First off I have to say this is the best explanation of EIP 1559. However as a miner this concerns me. This seems like it will be a 50% reduction in profits. Also if price drops enough it could become unprofitable and become an attack vector to the network itself. I wish they had increased the block reward to offset the losses.

[@vojin7video]

I've read analysis capping the reduction in profits to 30%. Also, this is the right thing to do on the road to 2.0. The fact EIP 1559 makes ETH deflationary, should by all accounts affect the price in a positive way, amortizing these reductions. I commend F2Pool for being on the right side of history here, as they put it. You'll be OK! ;)

[@codyswartz997]

@@vojin7video it’s not about being on the right side of history. If enough miners decide to stop hashing it will negatively effect the network. You and the devs are assuming you can effectively predict future price action. Most miners have a vested interest in Eth increasing its utility. Most miners don’t mind loosing profits just increase the block reward by 1 is all. The current model is we would lose 30-50% a lot of this depends on the tip and network usage which is unpredictable

[@davycrockett8886]

@@codyswartz997 I think the only people who could possibly attack the network are Ethereum miners themselves and they would suffer financial loses. 30% reduction can be compensated by a 30% price increase. Not to mention all the huge fees earned on a packed blockchain.

[@codyswartz997]

@@davycrockett8886 I completely disagree. Someone with a lot of money or wants eth to loose dominance to say Dot. They would be the ones to pay for the attack via nice hash

[@RanchHandFencing]

I made the switch to Ethereum Classic. ETC just upgraded with the Magneto fork.

[@rajasmasala]

You're really good at explaining things.

[@Finematics]

thanks! :)

[@justchelton]

This was an amazing video!

[@Finematics]

Thank you!

[@harshsharma-bh9sh]

Insane explanation 🔥🫡

[@hos42]

EIPs are not only inspired by BIPs. All governance proposal processes (including non crypto ones, e.g. PEP - Python Enhancement Proposal) are inspired from Internet Engineering Task Force (IETF) Request for Comments (RFCs) which have been used since the first days of the internet.

[@Finematics]

Of course! That would be too much detail for this video, so I skipped that :)

[@Eisenhorne77]

As a new crypto person, I am mining. This change will cause me to mine something other than eth. Not sure what that means to all of this but, I would be discouraged to point my miners at eth.

[@CydiaTesterForFun]

I will prob stop minning. Only reason I am doing it now (I only mine on my single gpu gaming rig) is that it is so stupidly lucrative. Last week I was making 0.003 eth a day which should not be ok on a gpu I bought for 500 dollars 1 year ago (2070s). Let's be honest, gas fees are holding back eth so there needs a change. We'll wait and see i guess

[@cloudshad0ws]

If you plan on mining long term (which is the only way it's really profitable from what I understand), then ETH seems like a bad choice anyway since ETH 2.0 is Proof of Stake and does away with miners completely. If you wanted to continue as a validator for the Ethereum blockchain, you could always stake your ETH and become a validator node.

[@RanchHandFencing]

I made the switch to Ethereum Classic. The Magneto upgrade happened yesterday.

[@smaragd_]

Nice job. Thanks!

[@Diego-gc4lo]

Why does the base fee need to be larger than the block reward AND the tip to make ether deflationary? Wouldn't it just need to be larger than the block reward? I'm no expert, but from what I understood the miner fee is paid by the user making the transaction which means the ether supply isn't increasing.

[@jacksondawg4364]

I agree. Well done video though 👍🏽

[@devsadisatsowala1003]

good explanation 👍

[@shadoninja]

Such insanely good content. Keep up the phenomenal work

[@Finematics]

Thanks!!

[@leoncampa]

Pros and cons for Miners I guess. The real question is: will miners maintain the same profitability than before? If the answer is no, more miners will stop mining, just as block sizes get bigger. This creates more risk for the Ethereum network as a whole as less miners are there to secure it. It also makes it more centralized, as only areas with low electricity costs will still see it profitable to mine. Those areas are few and far between, and tend to be conglomerated in countries which could be prone to manipulation.

[@Justmeme1016]

interesting point!

[@jorgeseixas4386]

Market law, prices will meet equilibrium between demand and supply

[@leoncampa]

@@jorgeseixas4386 That is only correct on small scale theory. Market law, left unchecked, can cause very rapid rise or falls in valuations within very short amounts of time. Prices never stay at equilibrium forever. Natural disasters, crime, wars etc are all factors that can very rapidly change valuations across all spectrums. An un-checked currency can never just remain "stabilized" You need an authority to do so, and that's what central banks are for.

[@jorgeseixas4386]

@@leoncampa Yes, but even then will have a natural equilibrium. Look, it all has to do with market's needs, preferences and other macro factors. But always, always finds stabilisation in market equilibrium. Probably will cause that ETH price will have to rise when demand for transactions is high or lowers when there are more miners than users (to cover your global war example).

[@justin-fractionalhub5532]

Awesome update! Eth is Money!!

[@johnnyblue1101]

Awesome content

[@Finematics]

thanks!

[@ricbn1]

Well explained. Gas fee deprived me of much investment opportunity when yield farming project spiked.😊

[@שמואלדישראלי-ב2י]

you should give b.protocol a look, bprotocol.org they found a way to reduce gas fee cost

[@pablowasserman]

Awesome video, as always. Would love to hear more about different ETH proposals. Maybe a comparison of BTC and ETH fundamentals would be cool too :)

[@Finematics]

Thanks! Yes ETH vs BTC would be a good topic, great suggestion :)

[@captmoroni]

5:15 Hit pause. Hit like. Hit subscribe. Hit play.

[@jakuboboza1713]

Nobody can guess what it will cause. Miners can move away or simply miners can stay with ETH because ETH would yield less ETH but more $ per ETH balancing the chance. Nobody knows what it will mean for miners.

[@ahmedatm]

Great video keep up the great work

[@Finematics]

thanks!

[@wachirangoima1969]

Very informative

[@Finematics]

thanks

[@shaunmadden545]

another amazing video. You are a goldmine of informative videos.

[@Finematics]

thanks! :)

[@CorpseCallosum]

ETH so rare its only found on the moon.

[@Finematics]

🚀🚀🚀

[@marselhabjanic2901]

you explaining stuff is great. youre very clear, the explanations and the drawings are easy to read and to connect with eachother (its good to visualize everything you thiunk of). and i like the accent :D

[@Finematics]

thanks! appreciate your comment! :)

[@barkolenbrener187]

Great job man! Your content is one of my favorites. Would you do a video how insurance in Defi works? Thank you champ!

[@Finematics]

Thanks!! Yes, there is a plan to make a video on insurance in DeFi

[@greg7mdp2]

Nice video. EIP 1559 will go live on Aug 4, 2021.

[@chunkauwong2097]

on 12:12 isnt the block reward < base fee burned to make ETH deflationary? why miner tips are included here if miner tips are just transfer among existing users.

[@theonlylongnguyen]

Yeah I also think it's a mistake

[@Finematics]

Yes, it is a mistake. I corrected it in the article and replied to a few comments about that, but I wasn't able to correct it in the video as I noticed it after the upload :(

[@theonlylongnguyen]

@@Finematics Don’t worry about it. Your video is super helpful and informative as always. :)

[@Finematics]

@@theonlylongnguyen thanks! :)

[@ITSAMETITUS]

This is fantastic, thank you. I'm binging all of your videos. Blockchain technology and Defi is a real rabbit hole and the more I learn, the more excited I get.

[@ahidalg2]

Great video as usual!

[@Finematics]

Thanks! :)

[@panuthep4035]

Before the EIP-1559, the gas fee is the Miner tip you already pay, and now after EIP-1559 you will have to pay the additional Base fee. I'm not quite sure if this the improvement or deprovement.....

[@romancastro6237]

*deterioration

[@thecaliant]

From this explanation, it seems like it will be easier to predict the gas fee required to trade on the Etherum network but as you said, it will impact the way miners will prioritize their workflow and screw up the whole system, I'm pretty sure if this will happen the Etherum team will try to incentive the miners with maybe portion of the base fee so they will not become cherry pickers. So do we know when is EIP 1559 will be implemented if it will happen at all? when is ETH 2.0 will be implemented?

[@ikechukwukevin-chika955]

so does this mean eth would gain value over the years if this is implemented?

[@BrentAllsop]

Nice Video, but I have a few questions. It says it would be deflationary if the block reward + miner tips was less than the base fee. But isn’t only the “block reward” inflationary (i.e. creates new either) while tips come from already existing either. So, isn’t it really just the block reward (new ether) being less than base fee (burned either)? And if we can control the block reward, we wouldn’t “loose control of the monetary policy” as indicated, right? I probably don’t understand but what you called an “interesting feedback loop” between network demand and supply of either seems problematic or destabilizing. When the network traffic increases, there is going to already be a natural supply/demand need for more either (or higher priced Ether). If you add to this less either, by burning more basefee, this will compound the problem, making the price rise even more extreme in such cases, and compounding the opposite way, with less network traffic? Isn’t it better to have feedback loops that stabilize things, rather than make things unstable, like this?

[@moneek1745]

This is what I've been asking all of these ETH developers and have received no responses. With ETH 2.0 in effect, the transaction speed is expected to multiply by 1024 and the issuance rate is expected to reduce. During times of high congestion the system the deflationary pressure due to burning ETH might be more than the issuance (inflationary pressure). This would cause people to hoard their ETH and would lead to a liquidity crisis due to shortage of ETH.

[@JinKee]

@@moneek1745 in 3:30 they say BASEFEE is adjusted automatically block to block. if people hoard their ETH then the BASEFEE becomes lower due to the blocks being half empty. So your ETH goes up in USD value, but what you pay in fees goes down in terms of ETH spent.

[@irvin5755]

11:50 Deflationary?.... Well you says that ETH would become like that if: tip + block reward < base fee. But i think that you forgot the fact that the tip is not printing new ETH. In my opinion ETH would be deflationary if: Block reward < base fee. But yeah, Please correct me if i am wrong.

[@noxvi4753]

Yes this! I was thinking the same thing. The miner tip is just the users own ethereum no eth is created.

[@janjakoblameijer]

great video buddy!

[@Finematics]

Thanks!

[@amitupadhyay6768]

It happened !!

[@Finematics]

🔥🔥🔥

[@FermiGBM1]

Great summary

[@rubix2007]

your research is amazing, well done.

[@Finematics]

Thanks! :)

[@wilsoncastaway2830]

A first year bachelor student in economics should be able to simply apply the concept of tax rate on supply and demand. Base fee simply works as tax, tips is what people are willing to pay for their transactions.

[@koopapro]

So basically when the tax fees equal up to $1800 that will be one ETH burned ????

[@acemad1]

It seems like the network will always be congested with higher prices than before. It will take 20 blocks to increase the base fee 10x, and it will take the same 20 blocks to decrease the base fee back to 1x? In this case people will have to pay 4-5x fee, because most of the time they can’t wait. The base fee will never reach it’s initial value after EIP-1559 implementation. And doubling the gas fee block will only enable those who were ready to pay higher fees to make more transactions, making the network busier than before or just as busy. So whoever wanted to have lower fee will be left outside, because they will be scared off with the high commission.

[@thesingingcryptofairy]

very well explained, thx!

[@aamrollahi]

This video was amazing, thank you

[@Finematics]

Thanks! Glad it was helpful :)

[@oscarasly1233]

amazing explanation, well done

[@Finematics]

thanks! 💛

[@sergiomota1995]

Amazing explanation, loving the examples

[@Finematics]

thanks!

[@cryptoforlife1984]

Perfect video !! Even if I don't like the idea of ​​eip 1559

[@LeoChanlch]

miner detected lol

[@tuanha6843]

Miners should like what this does for eth in the long term. Both for their current ETH holdings price, and future of the chain as the competition in the market for increases

[@epiksarcasm1028]

@@tuanha6843 Tbh EIP 1559 doesn't benefit us miners at all, the only thing it dose is make the rich richer. Miners get paid less (significantly less) and ETH whales make more money as the currency increases In value solely because they are burning ETH out of circulation. In the long run I see this hurting Ethereum since when we mine, we mine whatever is most profitable. If miners move away from ETH because of the new EIP it just becomes a low value joke currency.

[@SafetyLucas]

@@epiksarcasm1028 And when ETH 2.0 is implemented and mining switches to proof of stake, the whales will have majority control of the mining network because they will have the most available to stake. So they will be getting richer from deflation and richer from staking. The more you have, the more you get. This will lead control of the ETH network to become centralized around the major ETH holders, which defeats the purpose of crypto currency.

[@epiksarcasm1028]

@@SafetyLucas facts bro, lowkey when the eip hits, unless profitability magically increases or they brick all etherium asics then I'm moving on and selling my rigs and building new ones based on a better coin

[@davelorenzojr]

Fantastic content. Thank you!

[@Finematics]

Thanks!

[@ND-fd9sf]

Love your content 👍

[@Finematics]

thanks!

[@DilipsCodePath965]

great booss you made me proud on me in your mind

[@majksdhj]

视频内容非常有趣！有些事我不明白：我的okx钱包里面有usdt，我有恢复短语。【pride】-【pole】-【obtain】-【together】-【second】-【when】-【future】-【mask】-【review】-【nature】-【potato】-【bulb】: 我应该如何把它们变成比特币？

[@stanleygodspeed4009]

Interestingly enough there doesn't seem to be any attempt in fixing the sandwittch attacks that will still be possible due to miner tips.

[@as-369]

Interesting. Frontrunning will become more of a gambling toy. Good to know.

[@Bnelen]

Wow, excellent explanation.

[@Finematics]

Glad it was helpful! :)

[@Snide01]

@@Finematics Yes, thank you !!

[@stankmt5016]

It just went live on testnet today!

[@felonstomillionaires]

1 year later....This "asset" is still inflationary....Im 1.1 eth in, however, I still dont see how this can become actually deflationary.....the only factor I see that drives the price up, is dependant on ppl buying in...

[@yurcchello]

i predicted miners income decrease by 30-40% and it is right about 30%. but before that (in may-june '21) was a major drop in profits by half. and that thing is not gained attention by community

[@RanchHandFencing]

Time to switch to ethereum classic. ETC just upgraded with the Magneto fork.

[@Peter-du5zf]

Have fun staying poor

[@fheyo]

Progpow is rejected years ago in order not to delay Ethereum 2.0 . Now they implement this 6 months before Ethereum 2.0 . Home miners are angry.

[@Tribal1974]

Excellent video, Thanks

[@Finematics]

Glad you liked it! 💛

[@Fourthesauri]

Great explanation, thx

[@Finematics]

thanks!

[@1978nikolas]

Very ver good explanation man, i like the idea of burn eth and predictable gas price

[@duncanstenhouse4336]

Would this mean that we would need to sell our current ETH coins into ETH 1559? Or would ETH 1559 replace the token standard ETH 20 network? Thanks.

[@kissamies]

It's EIP-1559 (Ethereum improvement proposal), not ETH-1559. It is changing the system, not the actual tokens. So no need to sell.

[@SafetyLucas]

Why not just have the block size scale dynamically with network traffic, keep the block reward and have it scale with block size, and make a low flat rate transaction fee or no transaction fee? Or have the block time scale with network traffic by adjusting the mining difficulty and keep the block reward constant? There is certainly enough computing power on the Ethereum network to handle such fluctuations. There is no reason the users should have to bear the brunt of high network traffic. We have GPUs for that.

[@olutimilehinolushuyi9575]

Did EIP1559 work as intended in terms of keeping ETH deflationary and ensuring that the value of ETH does not drop? Is there research showing the effect of EIP1559 on ETH price stability?

[@leetcodewhitebelt]

I dont see how EIP 1559 will limit the number of overpaid transactions due to the concept of tipping the miners. It seems that with tipping, miners will just take transactions with the highest tips and neglect those without tips when the block size fills up, so we will still be in a state where transaction costs are highly variable. Of course, with this proposal the block size is doubling, but couldn't that have been implemented in the current protocol? I dont see how this is solving any problem. It seems like there is some other motivation with the proposal; I am guessing with burning the ETH to either de-incentivize miner collusion (but still can happen with tipping) or simply to make ETH deflationary as was mentioned.

[@aromax504]

Now miners will sort & include Tx s based on the miner tip. How is that being taken care of?

[@demisx]

The EIP 1559 has been implemented in the latest London release.

[@wwxra]

It's happening today😁👏🎉

[@fredlacroix6865]

4:14 wrong graphical representation .. more than should use > symbol

[@Finematics]

it is correct the price is just on the right side so the right-hand side is greater than left-hand side

[@sephirotic87]

I'm not a stupid person, but I still don't get the concept of Fee vs Miner tip and how changing it would solve any issue of congestion at all. Basically you take money away from miners to make ethereum less valuable, but the network still keeps congested, miners get less money and angrier and stop mining, thus the network will get even more congested. That doesn't make sense withint a Proof of Work system... I'm a miner, if ethereum stop being profitable I'll just ditch it for the next coin. Don't see how this is any good at all.

[@Snide01]

Miners will make more money from the price rising much higher due to more people willing to buy Eth. Lower gas prices will create MUCH higher demand. Also regular users who aren't buying new coins won't be effected by these crazy rushes to buy into these new projects..

[@DangelGames]

@@Snide01 It may increase the prices, but in no way It will increase the price 2x to 4x as it is nowadays. Also let's be honest, nobody will use "miner tip" because of the nature "Why should I spend more when nobody forces me to?"

[@Snide01]

@@DangelGames People are already using a miner tip so to speak, people will pay extremely high fees to get their transaction to go through first. Seconds can be the difference between a 10 times gain or 100 times gain.. Whales don't care whether they pay 15 or 150 dollars when they are making tens of thousands..

[@irvin5755]

@@DangelGames 2x would be possible if the block size would increase 2x too. Increasing the block size means means more transactions in it. Assuming that the number of transactions posted on ethereum per secound will be the same, it will cost miners 2x longer waiting to mine a block. And this may set the price 2x larger.

[@JohnDoe-kj2cs]

AMAZING

[@100Hasake]

When you say transactions do you mean like, buying stuff with Eth?