The EIP-1559 era: base fee plus tip

Two fees, one transaction

Before August 2021, Ethereum gas worked like a chaotic auction. Every transaction set its own price, validators picked the highest, and users frequently overpaid because they had no good way to estimate what was needed. Then Ethereum activated an upgrade called EIP-1559 (the London hard fork). It split the gas fee into two parts and changed the economics of ETH itself in the process.

Part one is the base fee. The network sets this automatically, block by block. If the last block was more than half full, the base fee goes up a bit. If it was less than half full, the base fee comes down. It's a thermostat — it self-adjusts toward equilibrium. You don't bid for it; you just pay whatever the current base fee is when your transaction confirms. And here's the twist: the base fee is burned. It doesn't go to the validator. It's permanently destroyed.

Part two is the priority tip — also called the priority fee. This is what you optionally add on top to incentivize a validator to include your transaction faster. The tip goes to the validator. The base fee gets burned. So when you send a transaction, your total gas price is: base fee + priority tip. Your wallet sets a reasonable default tip, but you can adjust it if you need to jump the line.

For traders, the practical effects are three. First, fee estimation is way more predictable than before — wallets can tell you with reasonable accuracy what a transaction will cost, and the chances of accidentally paying ten times the going rate (a common pre-2021 horror story) are dramatically lower. Second, you almost never overpay catastrophically anymore, because the base fee is a market-set floor, not a wild bid. Third, every transaction you make has a small deflationary effect on ETH. The fee you pay isn't just a cost — part of it is being destroyed. Over years of high network activity, this burn can offset a meaningful portion of the new ETH issued to validators, which is why analysts still talk about EIP-1559 as a fundamental change to ETH's monetary policy, not just a fee-market tweak.

Recap: since August 2021, Ethereum gas = base fee (auto-set, burned) + priority tip (you choose, goes to validator). More predictable, slightly deflationary when busy.