EIP-1559 is the adopted Ethereum proposal that redesigned the execution transaction-fee market around a protocol-adjusted base fee and a separate priority fee. It changed fee pricing and block-capacity flexibility; it did not switch Ethereum to proof of stake.
Base fee and flexible capacity
The protocol adjusts the next block’s base fee according to the preceding block’s gas use relative to a target. Blocks can temporarily use more gas than that target within the allowed limit. The base-fee portion is burned, while the effective priority fee compensates the block producer.
Understanding the fee caps
An EIP-1559 transaction specifies a maximum fee per gas and a maximum priority fee per gas. Provided the total cap covers the base fee, its effective priority fee is the smaller of the priority cap and the total cap minus the base fee.
For example, with a hypothetical 30-gwei base fee, 2-gwei priority cap and 40-gwei total cap, the effective price is 32 gwei per gas, not 40. The transaction’s gas usage then determines its execution charge.
What the change does not guarantee
More predictable fee adjustment does not guarantee cheap transactions or immediate inclusion during congestion. Burning also does not guarantee a continually falling ETH supply: net supply depends on issuance as well as destruction. Separate resource markets, such as blob gas, require their own fee rules.