Filecoin tests pave way for Ethereum fee restructure

A long anticipated Ethereum Improvement Proposal (EIP) which aims to tackle high network fees is currently being tested on the Filecoin network.

A proposal to change Ethereum’s fee structure has been in the pipeline since first being suggested in April 2019. A surge in network fees in recent months has brought the spotlight back on to EIP 1559, and it is being trialled on the digital storage platform Filecoin.

Ethereum co-founder, Vitalik Buterin, tweeted an update as more information and research is piled into the proposed upgrade.

In case you missed it: recent writing on fee market reform (EIP 1559)* My FAQ: https://t.co/E9JvIUkazS* @MicahZoltu on safety: https://t.co/uNOEqSDNxV* @bluepintail on fairness: https://t.co/bJYJSR1b0oOh and it seems to be working great on filecoin:https://t.co/sgWLPF1VXg

— vitalik.eth (@VitalikButerin) August 26, 2020

Filecoin software engineer, Jeromy Johnson, said the EIP code ‘appears to be doing its job’ on an ongoing test on the network. He added that there had been a couple of spikes in “base fee”, which is the new network fee architecture, but there was very little delay in messages making it into the chain.

Filecoin is a decentralized storage platform that is in the testnet phase. It has targeted September for the mainnet launch according to its August progress update. Sharing technology with Ethereum makes it a good testbed for EIP 1559.

On August 22, PegaSys developer Tim Beiko tweeted that two Ethereum clients are currently privately testing the code, Vulcanize's geth fork and Besu. He added that he would personally like to see EIP 1559 implemented on a network with a large state, such as Ropsten, to see if larger blocks are an issue.

A solution to high gas fees?

The proposal introduces the ‘base fee’ mechanism that dynamically adjusts fees based on the current network congestion levels. Currently, Ethereum network fees are calculated in an auction-type system where users ‘bid’ how much they’re willing to pay to have their transaction picked up by a miner. Naturally, the miners prioritize the higher bids first which leads to congestion and high gas prices under heavy load.

Under the new proposal, if the blockchain is more than 50% utilized then the base fee increases automatically, but if it is under 50% utilized, then it would decrease. Ethereum users would still be able to ‘jump the queue’ by paying a ‘tip’ on top of the base fee. All of the fees in ETH that are paid via the base fee are burnt and only the ‘tip’ is paid to miners.

The maximum difference in base fee from block to block would then be predictable because these increments are constrained. This would then allow wallets and dApps to automatically set the gas fees for users more reliably rather than simply estimate them.

It may be a while before EIP 1559 is rolled out on the Ethereum mainnet however. ETHhub founder Anthony Sassano predicted at least 6-12 months in his Daily Gwei newsletter on August 24.