EIP-1559, activated in the August 2021 London upgrade, rebuilt Ethereum's fee market. Instead of blind-bidding a single gas price, every block now carries a protocol-computed base fee that is burned, plus a small priority fee for the validator. It is the biggest change to how Ethereum charges for block space in the network's history.
The problem it replaced
Before London, Ethereum ran a first-price auction: you guessed a gas price, and if you guessed low you waited indefinitely, while guessing high meant overpaying; there was no refund of the gap between your bid and the market-clearing price. Wallets responded by systematically overbidding, users paid the anxiety tax, and fee estimation was folklore.
First-price auctions are a known-bad mechanism when bidders lack information. EIP-1559's insight was that the protocol itself has perfect information about one thing: how full the last block was. So let the protocol set the price.
How the base fee works
Each block has a gas target of 15 million and a hard cap of 30 million. After every block, the base fee adjusts mechanically: if the block used more than 15M gas, the base fee rises (up to +12.5% for a completely full block); if it used less, the base fee falls proportionally, down to −12.5% for an empty one.
The result is a controller that hunts for the price at which demand equals 15M gas per block. Sustained demand compounds quickly: ten consecutive full blocks (~2 minutes) raise the base fee about 3.2×; twenty raise it ~10×. Decay is symmetric, which is why spikes deflate within minutes once the rush passes.
Crucially, the base fee is burned: destroyed, not paid to anyone. That removes the incentive for validators to stuff blocks or manipulate fees to enrich themselves, and it ties ETH supply to network usage: in busy periods the burn has exceeded new issuance, making ETH net-deflationary block by block. Several million ETH have been burned since activation.
The fields your wallet actually sends
A modern ("type-2") transaction carries two fee fields, both in gwei:
What you pay, what comes back
You pay gas units × (base fee + tip), capped by maxFeePerGas. If the base fee at inclusion is below your cap, the unused headroom is simply never charged; the cap is insurance against spikes while you are pending, not an amount you spend. If the base fee rises above your cap, the transaction waits until the base fee comes back down (or you replace it).
This is why the practical advice differs from the pre-2021 era: be generous with the cap, modest with the tip. Overbidding the cap costs nothing; overbidding the tip is a pure donation to the validator.
Did it make gas cheap?
No, and it never claimed to. EIP-1559 makes fees predictable and removes the overpayment tax, but the price level is still set by demand for 15M gas per block. When a million people want the same block, the base fee goes wherever it must to ration it. Cheap came later, from a different direction: rollups moving execution off L1, and EIP-4844 giving those rollups cheap blob space. Most EVM L2s (the OP-Stack chains, Base among them) run EIP-1559 mechanics of their own, at prices a thousand times lower.