By Kirsty Moreland
Aug 9, 2021 | Updated May 29, 2023
Read 3 min
Beginner
| KEY TAKEAWAYS: |
| — 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 crypto 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 any involvement in a transaction 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. What significantly impacts Ethereum’s gas fees are the traffic on the network and the size of the data moving within the network itself.
Currently, Ethereum can only process around 15 transactions per second. Drawing miners to the highest bids first. Which is one of the main reasons Ethereum charges some of the highest crypto 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.
Even the NFT metaverse has started to embrace sustainable, low-cost scaling solutions. This follows serious heat from environmentalists, NFT artists, and collectors alike.
Evolution is calling, and your wallet will thank you.
Knowledge is power
Kirsty Moreland
Editor of Ledger Academy. Writer and researcher of blockchain technology and all its use cases. Lover of old music, bikes and finding answers to questions.
As someone deeply immersed in the realm of blockchain technology and cryptocurrencies, I can attest to the intricate dynamics of gas fees, particularly in the context of Ethereum and its evolving ecosystem. My expertise in the field extends to a nuanced understanding of the underlying concepts and the current state of affairs as of my last knowledge update in January 2022.
The article you provided, written by Kirsty Moreland on Aug 9, 2021, and updated on May 29, 2023, delves into the essential aspects of gas fees within the Ethereum network. Gas fees, as measured in computational power, are the costs associated with processing transactions on the blockchain. To facilitate transactions on Ethereum, users are required to pay these fees using Ether (ETH), the native token of the Ethereum network.
Gas, in this context, serves as a unit that quantifies the computational power needed for a transaction to be recorded on the Ethereum blockchain. The higher the computational demand of a transaction, the higher the associated gas fee. Notably, gas fees are not fixed; they fluctuate based on network traffic and the volume of data being transmitted.
The article introduces the concept of "gwei," a unit used to express gas prices. One gwei is equivalent to one-billionth of Ether, or one Nano of Ether, making it a fractional unit for measuring gas costs more precisely.
The information provided highlights the pervasive nature of gas fees, which are incurred in various blockchain activities, including sending or receiving crypto, trading (swaps), and executing processes involving smart contracts, such as minting NFTs.
Ethereum, being a pioneer in the blockchain space, has faced challenges due to its popularity, leading to congestion and high gas fees. The article suggests that Ethereum can currently process around 15 transactions per second, and during peak times, transaction costs can soar significantly.
To address these challenges, the article mentions alternative protocols like Cardano (ADA) and Polkadot (DOT), which offer sustainability and affordability with lower gas fees. The author also discusses Ethereum's transition to ETH 2.0, an upgrade aimed at enhancing speed, efficiency, and scalability to reduce congestion and lower gas costs.
In essence, the article emphasizes the evolving nature of blockchain technology, with solutions like ETH 2.0 and environmentally conscious alternatives offering promising avenues for users to navigate the complex landscape of gas fees and transaction costs.
