What is the Gas Fee in Crypto?
In the crypto industry, any type of transaction takes a certain amount of computational power to process. “Gas” measures the computational power required to validate and complete a particular task on a blockchain, and the gas fees act as the payment for that power. Gas fees are always in the native token of the blockchain; for example, you use Ether (ETH) to pay for gas fees on the Ethereum Network.
On the Ethereum Network, you need gas for the following transactions:
- Token minting
- Transferring tokens
- Executing smart contracts
- Powering dApps
- Storing data
Gas fees also secure the network; charging a fee for every transaction stops malicious actors from spamming the system. On Ethereum’s consensus layer, gas fees are distributed as a reward to users that stake ETH to support the network.
What is the Gas Limit?
The gas limit is the estimated maximum computational power that a validator could use to verify your transaction. The more complicated the transaction, the more computational work is required. Therefore, complex transactions require higher gas fees.
How are Gas Fees Calculated?
Gas fees are expressed in ‘gwei’ instead of ETH, because gas fees are usually a tiny part of ETH. Gwei means “Giga Wei”; Wei is the smallest denomination on the Ethereum nNetwork. 1 gwei is equivalent to 0.000000001 ETH, or 10-9 ETH.
The calculation is:
Total Gas Fee = Gas Limit * (Base Fee + Tip)
The base fee is the reserve price of the current block, and for your transaction to be included on the block, your gas fee must be equal to or more than the base fee.
The tip is the priority fee to motivate validators to prioritize your transaction. The higher your tip, the faster your transaction gets validated.
Say you want to transfer 1 ETH with a gas limit of 21,000 units and a base fee of 10 gwei, and you include a tip of 5 gwei. Your total is:
21,000 *(10 + 5) = 315,000 gwei (0.000315 ETH)
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.
Ethereum Gas Fee After the Merge
According to the Ethereum organization, the Ethereum Merge will not directly affect the gas fee on the Blockchain. However, the upgrade has prepared the network for subsequent upgrades, which will lower it.