Blog_2Blog_2Blog_2Blog_2
  • MARKET BUZZ
    • Daily Crypto News
    • Weekly Wrap Up
  • TOPICS
    • Crypto Basics
    • Defi
    • Metaverse
    • NFT
    • Blockchain
  • CRYPTO VERSE
    • Investing
    • Cryptocurrency
    • Price Predictions
    • Crypto Technical Analysis
    • Crypto Ama
    • Investment Research
  • PRODUCT
    • Tutorials
    • Product Features
    • Security Compliance
  • COINDCX
    • Announcement
    • Community
    • Crypto Competition
    • Listings
    • Opinion
    • Stories
Visit CoinDCX
✕
            No results See all results

            Ethereum Gas Fees Explained | Why is ETH Transaction Fee so High?

            September 14, 2022
            Ethereum Gas Fees: All You Need to Know

            Table of Contents

            • Key Takeaways:
            • Ethereum Gas Fee Explained:
            • How are Ethereum Gas Fees Determined?
            • What is Ethereum Gas Limit?
            • When is ETH Transaction Fee the Lowest?
            • Ways to Reduce Your Ethereum Gas Fees?
            • Optimize Transaction Time:
            • dApp Discounts:
            • DeFi Saver:
            • Layer 2 Solutions
            • Will the Upcoming Merge reduce Ethereum Gas Fees?
            • FAQs
            • What is Ethereum Gas?
            • Why are Ethereum gas prices so high?
            • When are ETH gas prices lowest?
            • Can you avoid Ethereum as fees?

            Key Takeaways:

            • Ethereum gas fee is the fees you have to pay for using the Ethereum Blockchain
            • The gas fee depends on the price of Ethereum and network congestion.
            • One can find the best slots to optimize and analyze ethereum gas fee price chart.
            • You can reduce the gas fees to an extent by optimizing them using various tricks.
            • Upcoming Ethereum Merge has no impact on the gas fee.

            Ethereum Gas Fee Explained:

            But what is gas fee after all? More importantly, how is it calculated? Well, that’s exactly what we’ll discuss now

            Think of Ethereum as a highway and all your transactions as cars. The gas fee in this analogy would be the toll tax you would pay. But why would someone pay the toll for each transaction? Because this highway leads to some amazing destinations (Decentralized Applications). Destinations that no other highway (Blockchain) could offer.

            But does Ethereum use this toll fee to maintain the infrastructure like an actual highway? Yes. A part of this toll fee would go to miners who are validating every transaction to make sure that Blockchain is always error and fraud-proof. Another part of it goes into revenue for Ethereum. They use it to push regular updates that improve our overall experience of the highway.

            Ethereum gas is the fee every individual has to pay for using the network. It is the incentive layer for the miners to verify the transactions on the blockchain using their computing power.

            How are Ethereum Gas Fees Determined?

            Now if you have ventured into cryptoverse for a while, you’d know that gas fee is not a constant. An exactly same transaction could cost you ten bucks to a staggering $80-100 at times. Why is that so? The answer lies in the way this gas fee is calculated. The gas fee is dependent on two factors. Gas units and gas price.

            Gas fee= gas units X gas price

            Gas units is a number that depends on the amount of computation required for a transaction. For e.g., if you send some Ether to someone, it requires 21,000 gas units. It’s the minimum number of units required for any transaction. On the other hand, Gas price is determined by the demand for making transactions. The more traffic, the higher the price. This is why you don’t pay the same gas fee each time you transact.

            The gas fee is usually expressed in Gwei which is a billionth part of an Ether. If the gas price is 100 Gwei, it means 1 gas unit currently costs 100 Gwei as per the demand. The gas price may vary throughout the day depending on the total traffic. Let’s combine these two now. If you need to send some ETH to someone at a time when the gas price for 1 gas unit is 100 Gwei, you’ll have to pay a total of -:

            21,000 gas units x 100 Gwei = 2,100,000 Gwei

            Since Gwei is one billionth of an ETH, you’ll pay 0.0021 Ether.

            To find the amount in dollars, multiply it by the price of ether i.e. 1200 USD (assumed).

            Hence 0.0021 Ether x 1200 USD = 2.52 USD total gas fee

            In short, the gas fee depends on the following parameters:

            1. Complexity of transaction (gas unit)
            2. Demand for making transactions (gas price)
            3. Price of Ether (to calculate dollar value)

            From the above calculation it is rather easy to predict the Reasons for increasing cost of Ethereum gas fees. Ethereum’s gas fee would jump up if there is the network is too congested. In that case, a lot of miners would seek higher fees to process the transactions. Also, if the price of Ether jumps up, it is once again not a good sign for gas fee. Think of it as oil that is mandatory to run the show. If the oil becomes too expensive, not a lot of us are going to drive as much as we would want to. If gas fee did not burn a hole in your pocket, you can also pay a priority fee in the form of tip so that miners pick up your transaction before anyone else.

            Additional Read: Ethereum vs Solana vs Polygon

            What is Ethereum Gas Limit?

            As discussed above, the standard limit on an Ethereum gas fee is 21,000 gas units. This means for a specific type of transaction, a user will NOT be able to consume more than these units. In this case, sending Ether to someone will not take more than 21,000 gas units. While executing a transaction, you can set any gas fee. In case you set it more than the limit, EVM will refund you the excess. However, if you spend less than the limit, there is a chance that your transaction never gets picked up by the miners.

            There is also a risk of losing your ETH in such a case. Say you only allocate 20,000 units to send ETH. The system will try to spend 20,000 units but will eventually fail, resulting in a loss of 20,000 units worth of Ether.

            When is ETH Transaction Fee the Lowest?

            As it turns out that each country has a specific period of activity. If you study that well, you can easily predict the time slots when the gas fee is the lowest for you. The busiest and most expensive times are on weekdays from 5:30 PM to 10:30 PM (IST). This is mainly because US and EU are at full throttle during these working hours. On weekdays, ETH gas price is lowest from 9:30 AM to 1:30 PM (IST)—when most of America is asleep, Europe is just about to start its day.

            The best time to make an ETH transaction is on a Sunday from 6 AM to 8 AM (IST)—that’s when ETH gas prices are at their lowest. You can also go ahead and pick out the best time slot for your transactions by analysing the Ethereum gas fees chart. 

            Ways to Reduce Your Ethereum Gas Fees?

            Okay. Now that we are well acquainted with the way gas fee is calculated and what are the best times to do a transaction, let us understand some of the ways in which one can optimize gas fees.

            Optimize Transaction Time:

            As discussed above, analyze the ethereum gas fees chart to find out the slots that work best for you. You can batch your transactions in a way that low-priority transactions are conducted only when the gas prices are under control. Apart from that, take your trades when the prices are not shooting up.

            dApp Discounts:

            There are many applications that refund the gas fee in a bid to lure users. Try to find such apps and use them to your good. For example, if you are a derivative trader, you can use Injective exchange. This exchange refunds all forms of fee that is required to onboard one to the Injective blockchain. Balancer is another example of a dApp that refunds gas fee in the form of BAL tokens.

            DeFi Saver:

            Apps like DeFi saver allow you to simulate your transactions so that you have a clear picture of what you are going to pay. It also allows you to customize your transaction to minimize the fee involved.

            Layer 2 Solutions

            Layer 2 solutions like Polygon and Harmony are helping the world to join Ethereum at a low cost. They provide a bunch of solutions which help in addressing Ethereum’s scalability issues. The fundamental idea is to offload transactions from Ethereum, process them parallelly elsewhere and share the final results back with Ethereum. This way a user ends up saving 99% of the gas fee levied by the Ethereum Network.

            Additional Read: Common Misconceptions around Ethereum merge 

            Will the Upcoming Merge reduce Ethereum Gas Fees?

            The Ethereum Merge would have no significant impact on the gas fee of Ethereum. This is mainly because the merge impacts the consensus layer only. 

            Think of Ethereum as a Sandwich. You have bread, ham, lettuce and sauces. The Merge is only going to change ham to something vegan and eco-friendly. In other words, it is only going to bring a significant impact in the way consensus is achieved. The parameters that would impact fees and speed are dependent on other layers which remain unchanged.

            With that being said, the merge is a step in the right direction for sure. The eventual upgrades would address the issues like gas fee as well. Merge is simply laying the foundation for future upgrades.

            FAQs

            What is Ethereum Gas?

            Ethereum gas is the fee every individual has to pay for using the network. It is the incentive layer for the miners to verify the transactions on the blockchain using their computing power.

            Why are Ethereum gas prices so high?

            Gas prices often jump up due to two main reasons. It is either when the traffic on the network is too high, causing congestion OR it is because the price of the Ether jumps up too much.

            When are ETH gas prices lowest?

            Gas prices depend on network congestion. You can find out the best timings for your timezone by evaluating the gas price chart analysis. The best time to make an ETH transaction is on a Sunday from 6 AM to 8 AM (IST)—that’s when ETH gas prices are at their lowest. You can also go ahead and pick out the best time slot for your transactions by analysing the Ethereum gas price chart. 

            Can you avoid Ethereum as fees?

            No. You can always reduce the gas fee using certain techniques but you can't avoid it. Miners need to be paid for the services they are rendering via their hardware for processing the transaction and adding 'blocks' of information and data to the blockchain.


            Disclaimer: User Generated Content – Original Content created by a member of CoinDCX Ambassador Program – The Pathbreaker Initiative. The views and opinions expressed within this post belong solely to the author.

            Author: Raghav Dudeja


            Share
            0
            CoinDCX
            CoinDCX

            Related posts

            March 23, 2023

            Arbitrum launches DAO, offering ARB airdrop to early adopters


            Read more
            SOL vs DOT
            March 23, 2023

            Solana vs Polkadot: Comparative Analysis of SOL vs DOT


            Read more
            Cardano vs Dogecoin: Comparative Analysis of ADA vs DOGE
            March 23, 2023

            Cardano vs Dogecoin: Comparative Analysis of ADA vs DOGE


            Read more

            Recent Posts

            • 0
              Ripple Price approaching $0.5, What triggered a 7% Jump in XRP Prices?
              March 28, 2023
            • 0
              Gains Network Price Prediction 2023: This is When GNS Price May Hit $10
              March 28, 2023
            • What is Linear Finance? How To Buy LINA Token In India?0
              What is Linear Finance? How To Buy LINA Token In India?
              March 28, 2023
            • Ethereum's Vitalik Sends First Transaction as Polygon zkEVM Mainnet Beta Has Been Launched0
              Polygon Labs Launches Beta version of zkEVM Mainnet
              March 28, 2023
            • What is Gains Network Token? How To Buy GNS Token In India?0
              What is Gains Network Token? How To Buy GNS Token In India?
              March 27, 2023

            Categories


            • BTC to INR


            • ETH to INR


            • USDT to INR


            • USDC to INR


            • BNB to INR


            • BUSD to INR


            • XRP to INR


            • ADA to INR


            • SOL to INR


            • DOGE to INR


            • SHIB to INR


            • MATIC to INR


            • TRX to INR

            Invest in Bitcoin, Ethereum, & other 200+ crypto assets.
            Download the app now, register & start with as low as Rs.100
            ios download link
            android download link
            qr code for download

            COMPANY

            Security
            Blog
            About
            Careers
            Referral Program

            PRODUCT

            Margin
            Trade
            Futures
            Insta
            Convert
            Lend
            Markets
            API Documentation

            SUPPORT

            Contact Support
            Frequently Asked Questions (FAQ)
            Contact Us

            • Customer Support: [email protected]
            • Team: [email protected]
            • Press: [email protected]

            SOCIAL LINKS

            Icon of FacebookFacebook
            Icon of FacebookTwitter
            Icon of InstagramInstagram
            Icon of TelegramTelegram
            Icon of LinkedInLinkedIn
            Icon of RedditReddit

            Logo of CoinDcx Download our Android/iOS App: CoinDCX Ⓒ All rights reserved by Primestack Pte. Ltd.

            DISCLAIMER

            The information and material contained herein are subject to change without prior notice including prices which may fluctuate based on market demand and supply. The material available on the site is proprietary to CoinDCX, its parent, Licensor and/or its affiliates and is for informational purposes and informed investors only. This material is not: (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, or (ii) intended to provide accounting, legal, or tax advice, or investment recommendations. Note Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.

              Visit CoinDCX
                        No results See all results
                          Go to mobile version