What Are Gas Fees? Learn Ways to Help Lower Them
It’s hard to look up the incredibly popular Ethereum (ETH) network without eventually encountering one of its most synonymous features: the gas fees.
Though they can admittedly seem a little irritating, there’s actually a very logical reason for these fees, along with a handful of ways to minimize them.
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That said, keep reading as we explore how gas fees work, why they are necessary, and whether Ethereum has done a good enough job lowering them for its loyal crypto users over the years.
Table of Contents
- What Is a Gas Fee?
- What Is Gwei?
- Why Gas Fees Are Necessary
- How Much Are Gas Fees on Ethereum?
- Base and Priority Fees
- Why Gas Fees Can Be So High
- How to Lower Gas Fees
- Heatmaps: Choose a Quiet Trading Time
- Optimizing Transaction Amounts
- Layer 2 Solutions
- EVM and Gas Fees
- Has Ethereum 2.0 Successfully Lowered Gas Fees?
- On the Flipside
- Why This Matters
- FAQs
What Is a Gas Fee?
Gas fee refers to the amount a person must pay when executing a transaction on the Ethereum blockchain.
You might be thinking, isn’t this virtually the same as a transaction fee?
Yes, they are pretty identical, but while other crypto networks will use the term transaction fee, Ethereum refers to them as ‘gas’ since they keep the Ethereum ‘computer’ up and running, almost like pouring fuel into a car.
Ethereum users must pay a gas fee for every transaction they make, whether buying cryptocurrency, NFTs, or any digital assets. The gas fee is not set in ETH, though, Etehreum’s native token; it is calculated in Gwei.
What Is Gwei?
Don’t worry—Gwei isn’t some obscure crypto that you will need to acquire to execute transactions; it’s simply a denomination of Ether.
In the same way that a cent is a denomination of the dollar, Gwei is a tiny fraction of an Ether, one billionth of a single token, to be exact.
To be clear, you will still pay for Ethereum’s gas fees in Ether; it’s just that Gwei can be used to round up a number and make it easier to refer to. Here is the Gwei to ETH equivalent for varying amounts:
- 10 Gwei = 0.00000001 ETH
- 100 Gwei = 0.00000010
- 1000 Gwei = 0.00000100
- 10,000 Gwei = 0.00001000
Knowing the difference between the two can be worth it so that you know what to expect when signing off on a transaction.
Why Gas Fees Are Necessary
When you pay a gas fee, the money doesn’t go to a team of higher-ups or individuals working behind the scenes. Instead, it is sent to validators who work within the network itself.
Just to be clear, Ethereum has used both Proof-of-Work and Proof-of-Stake as methods of verifying blockchain transactions. The former includes validators competing with one another to process a new block of transactions, while the latter sees people staking their own tokens to become a validator.
Both mechanisms involve individuals working to ensure each transaction that enters the network is reliable, safe, and secure, and therefore, they need to be paid. Validating transactions also uses up a lot of computing power and technical equipment, which the validators will also need to be paid for.
This is, therefore, how gas fees work; they provide the compensation needed to attract people to join Ethereum as validators since without them, it would be a vulnerable, sluggish, and ultimately ineffective blockchain.
How Much Are Gas Fees on Ethereum?
Before we examine the average gas fee, it’s important to understand that the exact price will be determined by supply and demand within the blockchain.
To put it simply, gas fees can fluctuate wildly over the course of even a single day, but there are luckily platforms, such as Etherscan for example, that provide updates on the price in real-time.
The average Ethereum gas fee tends to hover between 18 and 50 Gwei, though it can sometimes go higher or lower depending on network activity. For reference, here’s how much 18 Gwei would roughly be worth for each type of transaction:
- Swap: $16
- Borrowing: $14
- NFT Sale: $20
- Bridging: $5
Base and Priority Fees
When looking up ETH gas prices, you might see a distinction between base and priority fees.
The base fee was introduced in August 2021. As the name implies, it is the set fee for processing transactions determined by the network.
Priority fees are when the investor pays an extra amount to skip the line and have their order processed faster. The higher the tip, the faster your transaction will be processed, making it ideal for day traders looking to capitalize on sudden price movements.
Why Gas Fees Can Be So High
The main reason Ethereum can attract such high gas prices is simply its size and popularity.
It’s worth remembering that Ethereum is the second largest crypto network on the planet in terms of active users, only trailing behind Bitcoin (BTC). In 2024 alone, over 500,000 active addresses were associated with the Ethereum blockchain daily.
Additionally, many recognize Ethereum as the home of dApps and NFTs, another reason it has garnered such an immensely large audience.
With more people comes more transactions and, in turn, more work for the validators, for which they will need to be paid. This will reflect on the users, who will be required to pay more, especially during peak trading hours when validators are most busy.
Thankfully, though, there are a handful of methods that can be deployed to minimize gas fees on Ethereum.
How to Lower Gas Fees
Those who might be skeptical about using Ethereum due to its stringent gas fees can still manage the issue a little better by following these tips below.
Heatmaps: Choose a Quiet Trading Time
If Ethereum faces network congestion, that is, if too many people are scrambling to buy and sell simultaneously, it will slow the blockchain down and ramp up gas costs across the board.
Therefore, an easy way to lower the fees is to deduce when the network will be less active, which is usually at night and on the weekends.
Heatmaps and gas trackers can be useful tools for identifying busy periods, so be sure to use them when you can. The bright spots on a heatmap highlight when the network will be quiet and when fees will be a little lower.
Keep in mind that over 32% of Ethereum’s users are based in the US. Therefore, if you can choose a time where it will be late at night or a weekend evening for Americans, this will make the biggest impact on fees.
Optimizing Transaction Amounts
Another easy method to try to save on gas fees is to optimize your transactions. This can involve bundling several transactions into one order rather than spreading them out across multiple.
While you can do this manually, there are also many platforms and apps out there that can make order optimization a much more streamlined process.
DEX ( decentralized crypto exchange ) aggregators like 1inch and Matcha for example can help to find the most cost-effective path for a transaction by analyzing the weight and volume of the order.
Layer 2 Solutions
Layer 2 technology refers to platforms that can handle transactions outside of the main chain. By avoiding the busy nature of the Ethereum blockchain, these alternatives can often provide cheaper fees.
For example, Polygon is a layer-2 solution, meaning it runs alongside Ethereum but is still a separate entity. Arbtitrum and Optimism will use a technique called rollups, which allows them to register transactions off-chain and then send them back to the main Ethereum network, resulting in cheaper fees.
Essentially, you can think of layer-2 solutions like moving a car that was initially on a busy highway but then moved over to a quiet road with no other vehicles. It’ll be faster, and ultimately, the amount of gas will cost far less than on the main road, or ‘chain’, in this case.
EVM and Gas Fees
The EVM (Ethereum Virtual Machine) is a large virtual computer that allows developers to build Dapps, platforms, and tokens off the back of the Ethereum network.
Today, there are numerous high-profile blockchain networks that are classed as EVM compatible, many of which either rely on the Ethereum network or are hard forks of Ethereum’s blockchain.
These blockchains must also pay gas fees since they are based on Ethereum architecture, but their exact prices can vary. Therefore, this could be a good solution for those who want cheaper fees without abandoning Ethereum entirely. Here are the average gas prices measured by Gwei for the most popular EVM blockchains:
- Polygon PoS (POL) = 60.0
- BNB Smart Chain (BSC) = 1.1
- Avalanche (AVAX) = 32.00
- Fantom (FTM) = 26.00
Keep in mind that these amounts are conjoined with tokens other than ETH, so the Gwei amounts won’t hold the same value as they do when conducting ETH transactions.
Has Ethereum 2.0 Successfully Lowered Gas Fees?
Ethereum 2.0 wasn’t just a small update; it was proposed to be a major overhaul of the Ethereum network that would remedy many of its lingering issues.
Understandably, this led many to believe this also meant reducing gas fees. However, this was a misconception, as the Ethereum.org roadmap specifically states that 2.0 was “Never intended to lower gas fees” and is primarily focused on switching consensus mechanisms.
Despite that, have the changes that were made impacted the gas fees? The answer is yes, but not by much.
Before September 2022, that is, before Ethereum moved to Proof of Stake, gas fees were much more unpredictable, ranging anywhere from 22 to upwards of 100 Gwei. After that date, though, things have been slightly more manageable, with Gwei hovering between 15 and 50 on average.
There have also been far fewer cases of Ethereum losing control of its giant user base, which was a common occurrence in the past and resulted in absurdly high gas fees.
Therefore, while the number of transactions on Ethereum has remained relatively constant, the Ethereum 2.0 updates have still significantly reduced fees.
On the Flipside
- Many investors have begun turning towards other blockchains that possess cheaper fees and faster transaction speeds.
- Bitcoin Cash, Solana, Dogecoin, Litecoin, and Nano are just a few of many examples.
Why This Matters
There’s nothing worse than approaching the crypto market to buy some tokens only to have a chunk of your profits lost to gas fees. By conducting prior research, you can stay ahead of the curve and be fully aware of how much you’ll roughly be expected to pay, and also how to minimize the fees so that they don’t spiral out of your control.
FAQs
The Merge is a community-born term for Ethereum’s change from Proof of Work to Proof of Stake.
A major goal of Ethereum 2.0 was to improve its scalability. There has been some progress in this area, especially after The Merge.
ERC-20 is a token standard that allows developers to create tokens and NFTs on the Ethereum network. In the crypto ecosystem, token development is also commonly known as minting.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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