What are Gas Fees?
|— Gas fees measure exactly how much computational power any given transaction requires before it can be recorded on a blockchain network.|
— You need ETH to pay for the gas fees when transacting on Ethereum.
— Ethereum is under scrutiny because of its incredibly high gas fees due to increased network traffic as well as the sheer size of data being transmitted.
— The gas fee structure is evolving, thanks to alternative protocols like Cardano and Polkadot, which offer sustainability and affordability to their users.
Just got into the world of Ethereum? and wondering what are gas fees? what they’re used for and why they’re so hefty? We’ve got you covered.
Let’s face it; nobody likes gas fees
And that’s why you need to pay for it. Understanding what it means to pay for gas fees is very simple. If you’re trying to carry out virtually any type of transaction on Ethereum, you’re essentially negotiating directly with the network’s miners.
What you’re asking the miners is simple: you’re asking them to kindly consider executing your transaction in exchange for a gas fee. The higher the computational demand your transaction requires, the higher the gas fee you have to choke up.
Gas is simply a unit that measures how much computational power your transaction needs to register on a blockchain network like Ethereum.
Every time you engage in a transaction, even if it’s as simple as sending crypto to your best friend’s mom, it always requires computational power – or energy. Unfortunately, this energy requires fees.
What’s more, to cover these gas fees, you’ll be handing over a bunch of Ether (ETH) or some other native token. (More on this a little later.)
An insider tip
To maximize your gas fee savings, always check Etherscan before making any kind of transaction. This ensures you are transacting at the right time of day, while keeping track of gas prices across the board since they frequently change.
It’s interesting to observe a transaction as it is happening on Ethereum, to see what a user might be paying in actual gas fees. Since these fees are usually just small fractions of an ETH (Ether), fees are paid for using what is called “gwei.” It’s not too big of a deal, really. A single unit of gwei is defined as one-billionth (or one Nano) of Ether. So 1 Gwei equals 0.000000001 ETH.
What exactly can gas be used on?
Anytime you send or receive crypto, you will pay a gas fee. The same goes for making crypto trades (swaps) and running any kind of processes that require smart contracts, such as minting NFTs.
So if there is any transaction that you are involved in over a blockchain network that is either sending or receiving some amount of data – large or small – odds are you will be paying gas fees.
The Ethereum gas controversy
Ethereum is essentially the Bugatti of blockchains. That is to say, it offers incredible power and purpose while being a true pioneer of its class.
However – it has become so popular that it is bogged down with thousands of transactions, all competing to enter the next block. The traffic on the network and the size of the data being moved within the network itself have a significant impact on Ethereum’s gas fees.
Currently, Ethereum can only process around 15 transactions per second, so miners are drawn to the highest bids first, which is one of the main reasons Ethereum charges some of the highest gas fees. During the busiest times of day, transactions can cost up to 29 gwei, compared to only 5 gwei for off-peak hours.
As a result, the competition to enter each new block is incredibly stiff.
Do not despair; blockchain is evolving
Without a doubt, your number one priority should always be how to maximize your investment, right?
That’s precisely why Ethereum is leveling up by onboarding its highly anticipated ETH 2.0 solution. An upgrade that improves speed, efficiency, and scalability, it promises to drastically increase transactions, alleviate congestion, and eliminate high gas costs.
On a different note, crypto is steadily going green. Newer coins like ADA (Cardano) and DOT (Polkadot) are rocking the crypto market with their incredibly low gas fees, offering sustainable alternatives to their energy-consuming counterparts.
Evolution is calling, and your wallet will thank you.
So you’re into crypto, and you like the nuts and bolts? We have just the thing for you! Check out our School of Block episode on blockchain use cases.