What Is Crypto Gas War? Managing Gas Fees in Ethereum Blockchain

Introduction

As crypto adoption rises, blockchain networks are also grappling with shortcomings such as increased energy consumption and sky-high gas fees. Transaction speed and costs are two components that can adversely affect a platform’s performance in the blockchain realm. When the network begins to congest, these transaction fees can turn to break out as “gas wars.”

A crypto gas war is a condition in blockchain when several users compete to secure upcoming blocks of transactions on the network. The continuous bidding for validation of a single transaction by block validators leads to high network gas prices. These kinds of situations often occur during the sale of limited NFTs or at dApp (decentralized Applications) offerings. In this article, we will dive into how crypto gas wars happen, its effect, and strategies for managing them. But before gas wars, it’s essential to understand transactions or gas fees.

Basics of Gas in Crypto

Simply put, transaction fees is the operational charge a user pays for the validation of a transaction on the blockchain. This cost is charged to incentivize miners in Proof of Work and validator nodes in Proof of Stake consensus to utilize their computational resources. Though the term “gas” came after the Ethereum network and has a similar meaning to the fuel required to start an engine. Other blockchains, such as Bitcoin, Ripple, etc., use the word “transaction fee” instead. 

The minimum gas fees you will need to pay for the completion of a transaction are predetermined by the blockchain network. In the case of the Ethereum blockchain, the gas fee(paid in ETH) is divided into two parts: base price and tip. So, the gas fee formula looks something like this:

gas fee= units of gas x (base price + tip)

Here, units of gas (gas limit) are the maximum gas amount a user is willing to pay for the transaction. The base fee is auto-calculated and depends on network congestion. Tip, also known as priority fee, is the amount used to compensate validator nodes. The more tip your offer, the faster the transaction will be validated by nodes. 

During gas wars, participants tip validators with a higher gas price in order to lock the transaction block before others. This creates a situation where most users can either not afford the gas price or end up paying way more than the price of the asset they were buying.

Know More About Ethereum Gas Fees

How Crypto Gas Wars Affect The Transactions

Crypto gas wars can have various impacts on transaction throughput and validation time in blockchain networks. These wars typically occur during events like NFT and crypto asset sales when there is a surge in demand for transactions, leading to network congestion. As more participants compete to prioritize their transactions, the transaction fee goes up, making it expensive for users to proceed with their transactions on the network. Due to this, even regular transactions with lower gas have slower processing and delayed confirmation times. 

For instance, At Yuga Labs land sale of the metaverse project, a gas war broke out on the Ethereum blockchain, and users paid around $3,500(1.3 ETH at that time) for validation of the transaction. Some even tipped 2 times around $13,500 for an NFT with a price of $5800.

Such situations result in poor user experience and create concerns around the scalability and capability of the blockchain to handle increased numbers of transaction volume.

Strategies to Navigate Crypto Gas Wars

Here are a few things you can do to optimize transactions fees during gas wars:

• Set gas limit: Several wallets allow you to customize gas limits and tip prices when making a transaction. This can help you avoid high gas prices, but you might have to wait for the transaction to get confirmed.
• Monitor gas prices: By monitoring gas prices on the blockchain through available tools and charts, you can complete the transaction when network congestion is low and the gas fee is affordable.
• Use other platforms: Proceed with other available blockchains, dApps, and layer-2 solutions that have similar functionalities with lower transaction costs and congestion. 
• Avoid peak times: You can avoid gas wars and high transaction fees by identifying and waiting during periods when there are chances of a surge in network demand, like limited-period NFT sales, auctions, or dApp launches.

Additional Read: Top 10 Cryptos with Lowest Transaction Fees

Conclusion

The gas fee is an essential part of a blockchain network for proceeding with transactions, incentivizing miners/nodes, and safeguarding the network from malicious transactions and attacks. Several developments and proposals are being worked on to overcome network congestion and scalability issues of the blockchain. As a crypto investor, you can try staying vigilant, monitoring networks, and using alternative solutions to minimize the impact of crypto gas wars on your transaction costs.

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