HomeCryptoEthereum Gas Fees Explained

Ethereum Gas Fees Explained


As a newbie, you should keep in mind that gas runs everything!

  • Want to mint an NFT? First, you’ve got to pay gas fees.
  • Want to send tokens worth $0? Yup, you’re paying gas fees.
  • How about swapping tokens? Gas fees are waiting at the door!

Here’s another point to remember:

When you initiate a transaction on the Ethereum network, you pay a corresponding gas fee to incentivize miners to include it in a block.

Miners prioritize transactions based on the gas fees attached to them. In essence, gas fees determine the speed and priority at which transactions are processed on the Ethereum network.

All hail gas!

Gas fees comprise several components:

  • Gas limit (maximum amount of work you estimate a validator will do on a transaction)
  • Gas price (price per unit of work done)
  • Tips
  • Base fee

Let me quickly add this: The base fee is a new concept introduced by Ethereum when they developed the EIP-1559 pricing structure. It stabilizes gas prices so users are not slapped with a sudden increase in rates when demand is high.

Now, you can use this formula to calculate your gas fees:

Total fee = Gas limit * (Base fee + tips)

Let’s say John wants to send 1 ETH to his buddy. What will he pay in gas fees if the transaction’s gas limit is 21,000 units, the base fee is 150 gwei, and he tips 5 gwei?

Using the formula above:

21,000 * (150 + 5) = 3,255,000 gwei

But remember gas fee is always paid in ETH. So, let’s convert.

3,255,000 gwei = 0.003255 ETH

When John sends the money, he’ll pay 0.003255 ETH in gas fees.

Ethereum gas fees can be pretty steep compared to other blockchains’ transaction fees.

But you can minimize your fees by using these methods:

1. Choose your transaction times carefully

You can expect to pay higher gas fees if there’s network congestion on the Ethereum blockchain. However, it is avoidable.

The congestion level varies throughout the day. So if your transaction isn’t urgent, you can wait until the demand on the network is low.

Tracking these low congestion times manually can be a hassle; instead, use Ethereum Gas Chart or gasprice.io to check real-time gas fees.

Pro-tip:

  • Gas prices usually peak between 8 am and 1 pm (ET).
  • Weekends (Saturday and Sunday) are the best times to transact in ETH.
  • Try making your weekday transactions after midnight.

2. Consider Ethereum scaling solutions

zkSync is a layer 2 scaling solution for Ethereum and is a great way to save on gas fees, especially when deploying an NFT contract. It works by processing transactions off-chain and then settling them on-chain.

Another layer 2 scaling solution to consider is Polygon. It offers users a more affordable and faster way to process large transactions on the Ethereum network.

Other solutions to consider include:

3. Use dApps offering discounts on gas fees

You can save on gas fees by using Ethereum dApps and projects offering fee subsidies or discounts.

One example is Balancer. It offers up to 90% refund on gas fees in BAL tokens. If you trade frequently, Balancer is a great choice.

You can also look into Rook and Yearn’s V2 Vaults. With these DeFi apps, you can pay your gas fees alongside other users, thereby minimizing each individual’s payment.

The Ethereum 2.0 upgrade might be the long-awaited messiah coming to help reduce these gas fees. In fact, Ethereum claims gas fee reduction is one of the primary reasons behind its upgrade.

But it’s also a step in reducing congestion on the network and speeding up the blockchain.

Gas fees will reduce with the Ethereum 2.0 upgrade in two ways:

  • Sharding (splitting a blockchain into smaller blockchains to handle more transactions).
  • Switch from proof-of-work (PoW) to proof-of-stake (PoS).

“What does this have to do with gas fees?” Walk with me while I explain.

Currently, miners validate transactions using the PoW algorithm. After this upgrade, PoW will cease to exist, as will the miners.

Why? Miners are paid gas fees to validate transactions. If there are no more miners, then there’s no need for gas fees.

“Does this mean we’re free from gas fees forever?” No, gas fees will continue to exist, but they will be less popular. Some experts believe it will only be useful for smart contract deployments and interactions.

We’ll find out soon enough!

Gas fees play a vital role in the functioning of the Ethereum blockchain. But in recent times, they’ve become outrageous. As a result, users are always looking for ways to save money on gas. Use the tips in this article to avoid unnecessary expenses and learn how to calculate your fees before executing a transaction.

Recap

  • Gas is the fee paid in ETH to conduct a transaction on the Ethereum network.
  • The higher the demand on the network, the higher the gas fees.
  • The total gas fee depends on the gas limit, base fee, and tips.
  • You can save on gas fees by tracking low congestion times on the Ethereum network, using scaling solutions, and using dApps offering discounts.



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