The largest Ethereum mining pools split into two warring camps due to a new improvement proposal that provides a deflationary mechanism to Ether’s supply and supposes burning the bulk of the transaction fees.
Ethereum miners are discussing the development team’s plans to implement the EIP-1559 update, which supposes burning a part of the transaction fees in order to reduce the volatility of the gas price. This will lead to a drop in the transaction income of Ethereum miners. Sparkpool and F2Pool, two of the three largest Ethereum mining pools, are at odds. F2Pool came out in support of the proposal that will help reduce transactional revenues for miners, while Sparkpool expressed its opposition. F2Pool is currently the third largest Ethereum pool with around 11% network hashrate. Sparkpool, the largest mining pool on the Ethereum network, accounts for about 24% of the hashrate.
“Today, the general community along with core developers are siding with evolving Ethereum to include EIP-1559. It is important to side with the users and core contributors,” F2Pool wrote in its statement.
“It is a tyranny of the majority in the name of better UX (in fact not). It is robbery. Why we love ether and btc? Because it gives us perfect property right,” Sparkpool said in a Twitter thread on February 5. “EIP 1559 will break this. We are sad to see many people only care about price now.”
In January, Bitfly, the operator of the second largest mining pool Ethereum Ethermine (with around 20% hashrate), said in its Twitter that it was opposed to the adoption of EIP-1559 in its current form, arguing that “Ethereum’s future may be at risk.”
EIP-1559, first proposed by Vitalik Buterin in 2018, supposes burning part of the transaction fees. The goal of this update is to improve network security and ensure low volatility in transaction fees. EIP 1559 increases or decreases a number, ‘BASEFEE’, based on the current levels of congestion on Ethereum. If Ethereum is greater than 50% utilized, BASEFEE automatically increases; if it is less than 50% utilized, BASEFEE decreases. BASEFEE is burnt. No one receives BASEFEE.
Ethereum miners earned over $325 million in transaction fees in January, according to Block Research. This is the highest level ever recorded on the Ethereum network, as well as the first month that transaction fee revenues exceeded one third of total miners’ revenues.
The launch of the EIP-1559 update is scheduled for the end of the second quarter of 2021.