What is the Gas Fee in Crypto?
Every time a user conducts a transaction on the Ethereum network, even a simple activity such as sending some cryptocurrencies to family members or friends, computational power is required. This power consumed in completing the transaction requires a certain amount of crypto, called gas fees, to be paid.
Gas fee (or gas price), refers to the amount users pay to successfully perform a specific operation on the Ethereum network. Such activities include processing transactions, executing smart contracts, launching decentralized applications (dApps), minting and buying non-fungible tokens (NFTs), etc.
An auction-style mechanism determines the gas fees, where the user paying the highest amount is prioritized in the queue of pending transactions. This means the amount of fee influences how fast a transaction is processed.
What is the Gas Limit?
The estimated maximum amount of gas units you are willing to spend on a transaction is known as the gas limit. It is based on the complexity of the operation you intend to perform, as well as the speed at which you want the action to be fulfilled. This is because complex transactions require more resources and validators/miners will prioritize transactions offering the highest gas limits.
How are Gas Fees Calculated?
Gas prices are paid in Ether (Ethereum’s native currency) and measured in gwei, the smallest unit of Ether, where 1 gwei is equivalent to 0.000000001 ETH. Hence, 1 ETH equals 1 billion of gwei.
The total gas price for a transaction is calculated as follows:
Total Gas Price = Gas Unit (limit) * (Base Fee + Tip).
The base fee is a reserve price of the current block, which is the lowest amount of gas needed to include a transaction on the network. Also called the priority fee, the tip is an additional fee used to incentivize validators to prioritize a transaction in their block.
What is the Current Gas Fee?
It varies depending on the transaction type, day of the week, and time of day. In most cases, wallets have in-built calculators that automatically sets it for you. However, if you need to set the fee manually, you can use the Ethereum gas tracker in real-time.