An Ethereum receipt can show three fee figures that look interchangeable: a base fee, a priority fee and the maximum fee authorised by the sender. They do different jobs. Understanding that split is the most useful way to understand EIP-1559, the transaction-fee reform introduced by the London network upgrade.
London activated on Ethereum mainnet on August 5, 2021 at block 12,965,000. It included several protocol changes, but EIP-1559 had the most visible effect for ordinary users. It replaced the old first-price-only fee auction for a new transaction type with a protocol-calculated base fee, a user-selected tip and an explicit spending ceiling.
The fee on an ordinary Ethereum transaction
Ethereum measures computation and storage work in gas. A simple ETH transfer uses less gas than a complicated smart-contract interaction. Under the current execution-fee model, the amount actually paid is:
gas used × (base fee per gas + priority fee per gas)
The Ethereum gas documentation explains each component. The base fee is set by the protocol for a block and is burned. The priority fee, often called a tip, is paid to the validator that proposes the block. A wallet also asks for a maximum fee per gas: the most the sender permits it to spend. Any unused difference between that ceiling and the actual price is not paid.
Suppose a transaction consumes 21,000 gas, the block’s base fee is 20 gwei and the effective priority fee is 2 gwei. Its execution fee is 462,000 gwei, or 0.000462 ETH. Setting a max fee of 40 gwei would not make the user pay 40 gwei automatically; it would leave room for the base fee to change before inclusion.
Why the base fee moves
EIP-1559 gave blocks an elastic relationship between a target size and a higher maximum size. When the previous block uses more than the target, the next base fee rises. When it uses less, the base fee falls. The adjustment is bounded from one block to the next, which gives wallets a protocol value from which to estimate a likely fee instead of asking users to guess against a blind auction.
The complete EIP-1559 specification defines the transaction fields and adjustment rule. Elastic capacity can absorb a short burst of demand, but sustained demand above the target raises the base fee. It does not create unlimited block space.
Burning the base fee
The protocol removes the base-fee portion of each payment from circulation. Only the priority component and other proposer revenue go to the block proposer. Burning therefore links ETH supply to network usage, but it does not make ETH mechanically deflationary in every period. Net supply depends on both the amount burned and new issuance to validators.
London originally launched while Ethereum still used proof of work. That historical detail matters because articles written before the upgrade often describe miners as the continuing fee recipients. Ethereum completed the Merge on September 15, 2022. Validators, not miners, now propose blocks on mainnet.
What London did not solve
EIP-1559 improved the structure and estimation of execution fees. It did not promise permanently cheap transactions, increase demand-independent throughput or guarantee fast inclusion. A transaction can remain pending when its maximum fee is below the current base fee, and a low priority fee can make it less attractive when block space is contested.
Nor does a successful fee estimate make the application safe. A transaction can pay the expected gas and still call a malicious token, grant an excessive approval or execute at a poor swap price. The network charges for computation even when some contract calls revert. Our smart-contract guide separates execution guarantees from application and admin-key risk.
Execution gas and blob gas are separate
Rollups can also submit temporary data to Ethereum in blobs. EIP-4844 introduced blob transactions with their own gas accounting and self-adjusting fee market. The EIP-4844 specification is explicit that blob gas is independent of normal execution gas. A rollup transaction may therefore reflect a data-availability cost, rollup execution cost and settlement-related cost rather than one universal “Ethereum gas price.”
This is why a cheap rollup transfer and a costly mainnet contract call do not contradict one another. They consume different resources in different environments. Wallets and rollup interfaces normally abstract the calculation, but users should still confirm the selected network and total fee before signing.
How to read a wallet fee quote
- Check the network; a familiar asset ticker does not prove the transaction is on Ethereum mainnet.
- Distinguish the gas limit from the fee per unit of gas. The first estimates work; the second prices that work.
- Treat max fee as an authorised ceiling, not necessarily the final price.
- Use the wallet’s current estimate unless there is a clear reason to change it, then review the total in ETH and in the displayed fiat unit.
- For a contract call, inspect the asset, recipient, approval and expected output as well as the network fee.
London’s lasting contribution is not that Ethereum fees became low. It made the minimum price of execution explicit, adaptive and burnable, while leaving users a separate way to pay for inclusion priority. That distinction still governs ordinary Ethereum transactions.
Editorial note: Updated in full on September 3, 2026. The earlier version anticipated London before activation; this account follows the implemented fee model and Ethereum’s later move to proof of stake. It is educational content, not financial advice.
