Misconceptions about EIP-1559 causing high fees

Link to original tweet

EIP-1559 splits the single transaction fee you are used to into two components: the baseFee and the priorityFee. The protocol sets the baseFee automatically, and the most of the time you shouldn't have to worry about setting the priorityFee manually, similar to how you don't always need to touch the "Advanced" settings in your wallet interface.

After seeing many hot takes today on whether 1559 was to blame for high baseFees and priorityFees, I put together this explainer.

Why are baseFees high?

1. There have been a few large NFT drops → congestion.
2. Many services (eg. exchanges) disable functions in a window around network upgrades. This pent up demand is released once each platform is satisfied with the chain stability.
3. Some miners are setting a gas limit below 30mm, which gives us a target of ~13.5mm gas. Comparatively, the gas limit before the upgrade was 15mm → less blockspace available → a reduction in throughput
4. Positive outcome → ETH market volatility → increase in gas prices
5. People are trying out new 1559 features: sending tx type 2, sending their first burn tx

Why are priorityFees higher than 2 nanoEth (gwei)?

1. Wallet interfaces are still rolling out. Most people aren’t even sending the new transaction type → can’t adjust priorityFee
2. Gas APIs will need time to tune their algorithms for suggesting priorityFees aka “Tips” – right now many are still in the process of watching the mechanisms and adjusting.