EIP-1559 (Ethereum Improvement Protocol 1559):
This proposal was initially created by Vitalik Buterin with the intent of reducing the cost per transaction by not paying the miners the gas fee that Ethereum users pay by bidding for the gas fee. Ethereum users will now have a more fairly accurate estimate of the average gas price of a transaction based on the network's internal averages. A side effect of a more predictable base fee may lead to some reduction in gas prices if we assume that fee predictability means users will overpay for gas less frequently. For more information about how EIP-1559 will change Ethereum, see here.
Gas fee:
Gas refers to the transaction fee on the Ethereum blockchain. It is what users pay to get their transaction validated, or completed.
MetaMask-specific Gas Estimations:
- “Low” 🐢: is much lower than market prices and it allows a user to pay a lower fee when they are willing to wait a longer time. It allows you to wait a longer period and skip the price spikes (i.e. save money). This setting is based on past trends, which means we can never be sure the transaction goes through. If you require a transaction to go through, this may not be the right setting for you.
- “Market” 🦊: reflects market prices.
- “Aggressive” 🦍: is much higher compared to market prices. It allows you to set a really high max fee and priority fee to increase the likelihood of your transaction being successful if you’re expecting to participate in a gas war.
Base fee:
Generated by the protocol. Represents the minimum gasUsed multiplier required for a transaction to be included in a block (i.e. for a transaction to be completed). This is the part of the transaction fee that is burnt.
Max Priority fee - i.e. Priority fee or the miner’s tip
MetaMask will initially set this amount based on the previous block’s history. However, users will be allowed to to edit this amount within the Advanced Settings. It is added to the transaction and represents the part of the transaction fee that goes to the miner.
Max fee:
MetaMask will initially set this amount based on the previous block’s history. However, users will be allowed to edit this amount within the Advanced Settings. It represents the maximum amount that a user is willing to pay for their transaction (inclusive of base fee and max priority fee). The difference between max fee per gas and base fee + max priority fee is “refunded” to the user.
Gas limit:
The maximum amount of gas units that the transaction may be able to consume.
Gwei:
​​Gwei is a unit of ether, the smallest denomination, which stands for gigawei (or 1,000,000,000).¹ Gwei is used for gas fees, or rather payments made by users to compensate for the computing energy required to process and validate transactions on the Ethereum blockchain.²
Slippage:
Slippage is the expected percentage difference between a quoted and an executed price.
Sources:
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EIP-1559 (Ethereum Improvement Protocol 1559):
EIP-1559 is a proposal designed by Vitalik Buterin to optimize the transaction fee mechanism on the Ethereum blockchain. The primary goal is to reduce transaction costs by introducing a more predictable fee structure. Instead of users bidding for gas fees, a base fee is generated by the protocol. This base fee is a minimum requirement for a transaction to be included in a block and is burnt, contributing to the deflationary nature of Ethereum.
The proposal aims to provide Ethereum users with a more accurate estimate of the average gas price, enhancing fee predictability. This, in turn, might lead to a reduction in gas prices as users are expected to overpay less frequently.
Gas Fee:
Gas refers to the transaction fee on the Ethereum blockchain. Users pay this fee to have their transactions validated or completed by miners. With EIP-1559, the traditional bidding system is replaced by a more structured fee model, which includes the base fee and optional tips to miners.
MetaMask-specific Gas Estimations:
-
"Low" 🐢: A setting allowing users to pay a lower fee by waiting a longer time. It's based on past trends, but transaction success is not guaranteed.
-
"Market" 🦊: Reflects current market prices, providing a balanced trade-off between cost and transaction speed.
-
"Aggressive" 🦍: Sets a high max fee to increase the likelihood of transaction success, especially in scenarios like gas wars.
Base Fee:
The base fee is generated by the protocol and represents the minimum gasUsed multiplier required for a transaction to be included in a block. It is a crucial component of the transaction fee and is burnt.
Max Priority Fee:
This fee, also known as the miner's tip, is added to the transaction and represents the part of the fee that goes to the miner. Users can adjust this amount within MetaMask's Advanced Settings.
Max Fee:
The maximum amount a user is willing to pay for a transaction, inclusive of the base fee and max priority fee. Users can edit this amount in MetaMask's Advanced Settings.
Gas Limit:
The maximum amount of gas units a transaction may consume. It provides a cap on computational steps for a transaction.
Gwei:
Gwei is a unit of ether, representing one billion wei. It is used for gas fees, compensating for the computational energy required to process and validate transactions on the Ethereum blockchain.
Slippage:
Slippage is the expected percentage difference between a quoted and executed price. In the context of Ethereum transactions, it can impact the final cost of a transaction due to market fluctuations.
This comprehensive understanding of EIP-1559, gas fees, MetaMask-specific settings, and related concepts reflects a robust knowledge of Ethereum's inner workings and the ongoing efforts to improve its efficiency. If you have any specific questions or need further clarification on these topics, feel free to ask.
