You may have heard that Ethereum has high ‘’gas fees’’, but what is that? Some concepts to understand (more info here https://ethereum.org/en/developers/docs/gas/)
Here’s a fun visual representation https://txstreet.com/v/eth
How transactions are processed on Ethereum?
Ethereum is a “Proof of Work” network, which means that miners secure the network using computational power (GPUs and ASIC miners). These miners need to be compensated because computational power is costing them money (electricity and specialized equipment).
The Ethereum network can support a maximum of around 30 transactions per second. Here miners the must choose which transaction they want to validate. All the unprocessed transactions are stored in something known as ‘mempool’, a combination of memory and pool.
Gas refers to the fee required to conduct a transaction on Ethereum successfully.
What are all the fees to process a transaction?
More complicated transactions involving smart contracts require more computational work, so they require a higher gas. A transfer is less complicated than an NFT mint, or a swap. This fee is defined by the gas limit.
The base fee is the minimum amount of gas required to include a transaction on the Ethereum blockchain. This base fee is determined by the demand. If you are in a hurry, you can pay more. This base fee is then burned off (deflationary aspect of Ethereum).
The tip or priority fee, is an additional fee to have your transaction completed faster. This money goes to the Ethereum miners to confirm your transaction before others.
This sounds expensive and complicated, how much do I have to pay?
Wallets like metamask calculate automatically how much you have to pay.
Answer is it depends on the type of transaction, and the moment your transaction is processed (busy network or quiet).
There are rare occasions where you want to ‘’blast’’ a transaction in order to mint before anyone else. You will have to manually adjust the gas fees to something ridiculously high in order to mint before others. Why would you do that? Because it’s simply profitable for the most part.
Tips and tricks on how to pay less fees
Here is a list of the things to look out for when trying to avoid high gas on ETH.
First, check current gas prices. You can do this on https://coinmarketcap.com/ as well as https://etherscan.io/. On CMC you can check the top bar on the right side they display gas prices, if you hover you get a better breakdown of current prices. Look at the image below for reference.
On EtherScan the main page displays the current gas costs, but you can also go directly to the dedicated page here https://etherscan.io/gastracker This page gives you a nice breakdown on current costs for each type of transaction you wish to do.
