Ethereum Improvement Proposal (EIP)

What is Ethereum Improvement Proposal (EIP)?

Ethereum Improvement Proposal (EIP) is a formal system to propose new features and changes to the Ethereum blockchain.

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EIPs serve as town halls for the Ethereum community, where anyone can create an EIP detailing the technical specifications for the proposed changes. Each EIP is a bulletin for the community of Ethereum developers, researchers, and users to discuss, review, and collectively decide on the potential new features or processes for the blockchain.

Importance of Ethereum Improvement Proposals

According to Ethereum.org, the technical definition of Ethereum Improvement Proposal (EIP) is:

“An EIP is a design document providing information to the Ethereum community or describing a new feature for Ethereum or its processes or environment.”

EIPs are central to the Ethereum roadmap. Each network upgrade consists of a collection of EIPs that all Ethereum clients on the network are required to adopt. By implementing the necessary EIPs, a client can maintain consensus with other participants who have upgraded their systems.

EIPs provide an open and decentralized governance system where anyone can propose, challenge, debate, and adopt proposed changes. They are not approved and implemented immediately –each EIP is vetted and discussed, after which it is rejected or approved to be implemented as a standard upgraded or included in a set of network upgrades. 

EIPs are important as they document the history of proposed, rejected, and approved network upgrades for future reference. They also provide a convenient way to track the progress of network proposals.

How Do EIPs Work?

The standard process for all EIPs is as follows:

  1. Idea: The proposer has a set of features and upgrade proposals in mind that they think will benefit the Ethereum network. Naturally, the idea phase is not tracked within the EIP repository.
  2. Draft: The proposer formally submits an EIP to the repository. The EIP is now openly being considered. 
  3. Review: The proposer marks the EIP ready and requests peer review.
  4. Last call: The EIP has been considered and gets assigned “Last Call” status. A review end date is set. If the EIP needs to be modified, it will revert to show “Review” status.
  5. Final: Once all the technical concerns regarding the EIP are addressed, and the EIP maintains “Last Call” status for over two weeks, its status is updated to “Final.” Now, the EIP is in its final state and cannot be updated except for type errors and non-normative clarifications.

If the EIP is not implemented, it will be marked as:

  • Stagnant: If an EIP in “draft” or “review” is inactive for more than six months, it is marked as “stagnant.” The EIP can be resurrected by moving it to “draft.”
  • Withdrawn: If the EIP author chooses to withdraw their EIP, it will be marked as “withdrawn.” The same idea pursued at a later date will be considered a new proposal.
  • Living: A special status for EIPs that do not reach a state of finality and are designed to be continuously updated.

Types of EIPs 

There are three major types of EIPs: Standards Track, Meta, and Informational.

Standards Track EIPs

Standards Track EIPs are proposals that affect most or all Ethereum implementations. It includes changes to the network protocol, changes in block or transaction validity rules, and upgrades affecting the interoperability of applications using Ethereum. 

Standards Track EIPs can be further broken down into the following categories:

  • Core EIP: Core EIP must be widely adopted by all participating nodes on the Ethereum network to stay in consensus with others. A core EIP requires broader consensus within the community compared to other EIPs.
  • Networking: Networking includes network improvements around devp2p and Light Ethereum Subprotocol
  • Interface: Interface includes improvements around client API/RPC specifications and standards.
  • Ethereum Request for Comment (ERC): ERC are application-level upgrades and changes that do not need to be adopted by all participants, unlike a core EIP. ERC includes contract standards, token standards, name registries, URI schemes, library/package formats, and wallet formats.

Meta EIPs 

Meta EIPs propose changes to areas other than the Ethereum protocol. Examples of Meta EIPs include changes to procedures and guidelines, decision-making processes, and tools or environments used in Ethereum development. 

Informational EIPs

Informational EIPs do not propose new features. Instead, they highlight Ethereum design issues and provide general guidelines and information to the community. The Ethereum community is free to ignore Informational EIPs or follow their advice. 

Examples of Ethereum Improvement Proposals

  • EIP-1559 and the London hard fork

EIP-1559 was a landmark EIP implemented in August 2021 that changed how Ethereum calculated and processed gas fees. It was created to address the issue of fluctuating gas fees on the blockchain. The EIP introduced a new fee structure that included a base fee to make gas fees more predictable. 

EIP-1559 was introduced as a part of the London hard fork, which included other proposals, such as EIP-3198, EIP-3529, EIP-3541, and EIP-3554.

  • ERC-721 and the Birth of NFTs

ERC-721 introduced a new token standard on Ethereum that allowed users to mint, trade, and own one-of-a-kind non-fungible tokens (NFTs). This EIP received the “final” status in June 2018.

Before ERC-721, tokens on Ethereum were primarily fungible. The introduction of NFTs on Ethereum unlocked lucrative markets such as digital art, blockchain gaming, metaverse, and real-world asset tokenization.

Ethereum is the leading technology stack for applications on the blockchain. ERC-721 is the seven hundred and twenty-first proposal in the Ethereum proposal process (EIPs) to standardize how these applications are made and how Ethereum will work. (Most proposals are not accepted.)

On 21 June 2018, ERC-721 was accepted as “final” status, meaning there is significant support and consensus among people that care about this stuff.

  • EIP-4844 and the Future of Ethereum

EIP-4844, also known as proto-dank sharding, is an upcoming improvement proposal that is designed to help Ethereum scale via rollups. 

Rollups are seen as the go-to scaling solution for Ethereum as the network tries to achieve mass scale while maintaining security and decentralization. EIP-4844 will enable rollups to process transactions more cheaply by introducing temporary data blobs to each block.

The data stored in the temporary data blobs will not be accessible by the Ethereum Virtual Machine (EVM), which means that the EVM will store and process less data resulting in lower gas fees.

Furthermore, the data blobs will store the history of roll-up transactions only for a fixed time period (1-3 months), after which it will be automatically deleted. 

The Bottom Line

EIPs lie at the core of Ethereum’s ongoing evolution. They play a vital role in fostering an inclusive and collaborative community, facilitating the implementation of changes that enhance the network’s capabilities.

From optimizing transaction fees to introducing revolutionary standards like NFTs, EIPs have significantly shaped the trajectory of the project’s growth. Through the continuous contribution and discussion of EIPs, Ethereum remains a vibrant ecosystem that thrives on collective efforts and visionary ideas.

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Mensholong Lepcha

Mensholong Lepcha is a financial journalist specializing in cryptocurrencies and global equity markets. He has worked for reputed firms such as Reuters and Capital.com. Fascinated with blockchain technology, NFTs, and the contrarian school of investing, Mensholong has expertise in analyzing tokenomics, price movement, and technical details of Bitcoin, Ethereum, and other blockchain networks. He has also written articles on a wide range of financial topics including commodities, forex, central bank monetary policies, and other economic news.