Viewpoint | Miners Will Not Accept EIP-1559, Here’s Why

This article is sourced from Ethereum enthusiasts, authored by A Jian.

The debate surrounding EIP-1559 is something that everyone has heard of to some extent. If you know more, you also know that I am one of the few who have consistently opposed it and expressed my views in writing.

At this point in time, treating EIP-1559 as a policy and discussing it calmly may no longer be possible. In all public opinion spaces, both sides are almost at each other's throats.

However, the reason for this lies in the fact that people are not discussing the policy itself; rather, they have preconceived notions and then categorize people into good and bad based on others' reactions to these notions. The bad guys, of course, will not back down, but "I" stand on the side of justice and will always find a way, always have the power to make them yield.

For example, EIP-1559 is an experience that reduces the issuance of ETH and even achieves deflation; deflation is certainly a good thing, so those who oppose it must be the bad guys;

Or perhaps the opponents are not bad people, but what good does your opposition do? The historical trend is overwhelming; opposing it is not only unhelpful but a bit foolish; oh, but this proposal will burn the transaction fees that originally belonged to miners, so miners will definitely oppose it, after all, it’s about interests; but you people have already made so much money and are unwilling to sacrifice for the greater good, which shows you are not good people.

But what can you do? Can you fork? What’s the use of forking? With the chain that has 1559 and community support, it will definitely be more successful; then we will see if you can keep saying no while being honest in your actions.

Let me raise a few questions:

(1) Is deflation necessarily a good thing? Are there any conditions?

According to the quantity theory of money, deflation will lead to an increase in the purchasing power of money, which is true. The problem is how deflation is achieved, which is not an inconsequential issue. Proposals like EIP-1559 do not have a fixed rate of deflation; in other words, the issuance rate of ETH itself will become unstable; this instability will greatly hinder the functioning of the monetary market, just as unexpected inflation affects the monetary market, causing excessive investment and insufficient savings, unexpected deflation has the opposite effect.

In other words, a good monetary policy should be one that maintains a stable issuance rate as much as possible. (Of course, rebuttals are welcome.)

(2) If a proposal reduces miners' income, will miners necessarily oppose it?

I think if you propose to reduce block rewards, it would also reduce miners' income, but the resulting divisions would not be as significant as those caused by EIP-1559. There might not even be any divisions; everyone would just accept it. At most, fundamentalists like me would complain a bit about how ETH's monetary policy is still not stable.

When discussing 1559, one of the most common fallacies is to say, "Isn't this just reducing miners' income by 50%?" It really isn't. This is fundamentally different from reducing block rewards. The essence of 1559 is to ensure that miners' earnings from providing gas are only related to their marginal costs through dynamic operations; in other words, even as Ethereum becomes more successful and the cost of transactions rises, these earnings will have nothing to do with miners and will all be burned.

This is not just about reducing miners' income; it is about depriving miners of the opportunity to benefit from Ethereum's success.

So, this is not merely a short-term consideration of interests as stated in the public declaration of the fish pool; on the contrary, the earnings related to transaction fees are the most long-term, even more so than block rewards.

(3) Even if you miners have the guts, do you have the ability to fork? Can you still not mine ETH that implements 1559?

Oh, this time you are right. Miners will still mine ETH that implements 1559, that’s for sure, but they will fork, and they will use mining pools.

Let me explain with an animated image:

The image above demonstrates the process of Base Fee adjustment upwards. The blue downward-sloping line is the demand curve, representing the highest price users are willing to pay for each unit of gas; the position of this line also indicates the level of market demand. The orange upward-sloping line is the supply curve, which is the miners' own marginal cost curve and represents their minimum price requirement for each unit of gas.

When market demand is strong, and the agreed-upon number of transactions to be packaged by users and miners exceeds the target amount defined by the EIP-1559 mechanism, the Base Fee will continue to adjust upwards until the gas consumption amount that users are willing to send transactions matches the target amount.

This image can explain many things, including the claim by supporters of EIP-1559 that the continuously adjusting Base Fee can create partially filled blocks; thus, the price that determines whether a transaction can be included in a block is, besides the Base Fee, the miners' marginal cost, not the bids of other users.

And the miners' marginal cost is more stable and predictable than the bids of other users, thus enhancing the user experience. (I agree with what they say about the "partially filled block" effect, but I don’t think miners' marginal costs are easily predictable, meaning I don’t believe this method can truly provide a qualitative improvement. However, many supporters also do not understand how this viewpoint is substantiated.)

But have you noticed that throughout the adjustment process, the price miners receive is always the lower edge of the green graph (i.e., the amount of ETH that is burned) and is unrelated to users' evaluations of gas.

In other words, suppose Ethereum is very successful, and users are willing to pay double the price for each unit of gas; can miners get more transaction fee earnings? No, because the difference between users' valuations and miners' marginal costs will be swallowed by the Base Fee.

What does this mean?

This means that if there is another forked chain that does not implement 1559; disregarding the differences in block rewards, the transaction fee earnings miners receive from mining these two chains may be the same. See the diagram below:

In the scenario of the forked chain shown on the right, it has no users, so the blue demand curve is very far left, indicating that users' valuation of each unit of gas is very low. However, the miners' transaction fee earnings are the same as those on the left (the 1559 chain with stronger demand), represented by the triangle above the marginal cost curve and below the TIP line.

In other words, suppose there is now a forked Ethereum chain with 1559 and more users; it will not be able to leverage its success to eliminate this forked chain; because its success has nothing to do with miners, it will not bring overwhelming benefits to miners, so miners will not abandon this forked chain.

Miners will only allocate their computing power almost in real-time based on the value of block rewards on these two chains, which is what we know as mining pools. And every time a user increases on this forked chain, the comparative advantages of the two chains will reverse by one.

I will not deny that this chain with 1559 may have a higher coin price, after all, the cryptocurrencies on the forked chain may be dumped.

But, honestly, what good does this do for Ethereum? A group of people, confidently claiming that EIP-1559 will bring greater security and stabilize the fluctuations of Ethereum's mining power, may result in Ethereum facing even greater fluctuations in mining power. This is the unexpected result of fatal hubris.

We often say that miners' earnings determine the security of a chain, yet paradoxically support a policy that confines miners to rely solely on block rewards as their main income. Similarly, Ethereum users are also oblivious to the fact that they have quietly been deprived of the right to purchase more security by offering higher prices.

On a chain implementing 1559, the cost for users to send transactions can still determine whether their transactions are prioritized in a block, but this cost can no longer buy security.

("How do I know what you say is right?" "Use your own reason.")

Finally, will Ethereum fork?

As far as I know, none of the critics of 1559 sincerely hope for a fork of Ethereum; no one truly believes that war is a good thing, and no one likes to see the entire ecosystem fall into chaos. On the contrary, supporters of 1559 often mention forking, with a somewhat "I doubt you dare" tone.

From my personal perspective, I do not know how to dispel this atmosphere that permeates the Ethereum community: on one hand, it is believed that miners are a group of immoral people who only care about their own enjoyment, regardless of others' suffering; on the other hand, it is believed that the ultimate outcome of social operation is purely determined by power, so as long as someone or some group is powerful enough, they can subdue these immoral people and force them to yield.

I will no longer discuss whether miners should be responsible for many user experience issues. I will discuss the latter: Is the operation of a society really determined by power? Or rather, can those with power do as they please? Or can power combined with wisdom transform society and lead to progress? My answer is no.

From social sciences, especially economics, the most important lesson we learn is that we cannot change the mechanisms of society according to our wishes without causing terrible consequences. Just as planned economies cannot be implemented, it is not because everyone’s moral standards are not high enough, but because they lack sufficient information to make reasonable decisions.

In a confrontational atmosphere, it is easy for everyone to fall into the pleasure of cornering the enemy, without considering how much they have to pay, but no group or person is the enemy of wrong policies; eliminating them will not make things better; the true enemy of wrong policies is economic laws.

However, saying these words may not be of much use. Ethereum may still fall into a fork because people are unwilling to give up a seemingly beautiful policy and are even less willing to abandon their prejudices against another group.

I say this just to let everyone know:

1. This is not a short-term matter, nor is it solely related to interests; it concerns loyalty. If implemented, Ethereum's miners will no longer have any loyalty to Ethereum; it concerns tolerance. Are you willing to accept the existence of another group in society that you do not understand but provides services to others? I know some people do not care about this loyalty, but I hope someone does.

2. When you discuss policies and express support, please try to remain clear-headed, taking responsibility for yourself and for others. The tyrants who undermine the democracy of city-states have all come to power under beautiful banners.

Original link: https://mp.weixin.qq.com/s/e_Gf1JGUZrpERiGuUNkdZQ