If you’re one of those people who get confused when gas fees come up in your circle of tech friends, you’ve come to the right place. This article will go over Ethereum gas fees in depth. I’ve also included some practical examples to help persons new to cryptocurrency.

What’s gas?

“Gas” is the cost associated with completing transactions on the Ethereum network. Need to transfer ETH between two addresses? You need gas for that. Wanna mint some NFTs? Bring gas. What about swapping Ethereum (ETH) for various tokens? More gas, you guessed it!

Anything utilizing ERC-20 tokens (Ethereum-based tokens) necessitates the spending of tiny sums of ETH on gas. In other words, even if you don’t want to keep any ETH, say, because you just want to trade smaller-cap altcoins, you must still have some ETH in your wallet to cover gas fees. Ignoring it can cost you a lot of money!

Why do I have to pay Ethereum gas fees?

To execute transactions on the Ethereum blockchain, processing power is required from miners, who are compensated with gas. Ethereum gas fees also contribute to the safety of the network. Every transaction has a cost attached to avoid spamming or unintentional infinite loops.

How are Ethereum gas fees calculated? 

We express the price of gas in gwei (giga wei). Wei is the lowest fraction of an ether, hence one gwei = 1,000,000,000 (1 billion) wei or 0.000000001 ETH. This doesn’t seem so bad, does it? So why are people moaning about Ethereum gas fees?

Transaction costs are influenced by two factors: the current gas price and the volume of gas used.

At various periods, we’ve seen gas prices range from 6 gwei to 2,000 gwei. So why are they capable of such massive changes? Well, that depends on the current activity level of the Ethereum network. Prices increase as network activity rises.

When looking through gas prices, you’ll frequently notice three or four distinct costs dependent on transaction speed: rapid, fast, standard, and slow. Unsurprisingly, the faster the transaction, the higher the charge. Generally, you want to use the fastest speed when buying or selling tokens, especially if their price is changing quickly. If you’re merely moving tokens between wallets or purchasing tokens when the market is calm, you may choose standard or slow speed because it doesn’t matter if the transaction takes a little longer to complete.

The second factor to consider is the amount of gas needed for each transaction. The Ethereum network’s smallest transaction, such as sending ETH between two addresses, requires 21,000 units. More complex smart contract operations, like purchasing other tokens or staking your tokens, consume far more gas.

It’s also worth noting that some transactions have multiple stages, each of which requires a different amount of gas. To convert Tether (USDT) for Chainlink (LINK), for example, two transactions are required: USDT > ETH and ETH > LINK. If you try to complete this transaction on (say) Uniswap, you would only get an estimated gas charge for the first step (USDT to ETH).

Gas limit 

Your gas limit is the most gas you will consume in a single transaction. If the actual amount of gas used falls below the limit you selected, the extra gas will be returned. However, if your limit is too low, you either won’t be able to perform the transaction or the transaction will fail and that gas will be wasted. This is particularly risky if you’re attempting to acquire a token when the network is busy and the price is fluctuating quickly.

Do the London Hard Fork and EIP-1559 address the problem of high Ethereum gas fees?

Actually, no. In the former system, gas payments were effectively based on a blind auction model: if you want to ensure that your transaction goes through fast while the network is crowded, you have to pay considerably more than you would during calm periods since you don’t know how much gas other people are paying.

The new approach is more complicated, but it is intended to be more transparent and equitable.

The base fee is the first component of the new model. This can vary based on how busy the network is at any given time. Because the base fee is continually burnt, ETH may become a deflationary asset over time. Although ETH is in endless supply, more tokens are burnt than mined, when the network is busy, causing the number of ETH in circulation to fall.

The second component of the cost is a tip to the miner. It may be altered if the sender wishes to perform the transaction faster, so it functions similarly to the old system’s sender selecting the transaction speed.

Gas prices will be less erratic, with fewer unexpected surges, but they will not necessarily be lower. Utilizing other blockchains or scaling solutions is the best way to experience lower gas prices (e.g. Solana, Polygon, Arbitrum, etc.)

How Fluidcoins comes in 

While Ethereum’s core developers have worked relentlessly to improve the blockchain’s functionality, the platform’s difficulties have created fresh chances for other blockchains to step up and win over more crypto projects from across the world. It is simple for developers to switch to these new platforms or at the very least alternate between them and Ethereum because the majority of these emerging blockchains offer Ethereum compatibility along with a variety of improvements, such as faster transactions, quicker processing times, and other benefits.

At Fluidcoins, we’re all about bringing crypto utility to the hands of the everyday individual. Unfortunately, doing this solely on Ethereum is not feasible due to its various scalability challenges. This is why we’ve made it our duty to be at the forefront of alternative blockchain integrations in Africa. This is particularly important because, for everyday individuals to incorporate crypto into their daily lives, paying ridiculous gas fees whenever a transaction needs to be made is simply impossible. 

To solve this issue, Fluidcoins supports some of the cheapest and quickest blockchains currently in use. These consist of Tron, Polygon, Solana, Binance Smart Chain, etc. As a result, we have already assisted in processing transactions totaling millions of dollars for several users across multiple chains for a fraction of the cost incurred on Ethereum, and we’re only getting started.  

With the introduction of 12 more tokens and two more blockchains integrations on our Wallets-as-a-Service product, we’re opening up the same tools we use to builders all over. With a single API integration, you can provide crypto-powered services on some of the cheapest blockchains for free.

Conclusion

This is an exciting time to build, expand, and promote a preferred alternative blockchain as the cryptocurrency industry continues to diversify from its default reliance on a small number of dominant blockchains to a surplus of developing platforms. A fundamental principle of the cryptocurrency sector is the freedom to support any blockchain network you prefer, and this has never been simpler for African businesses thanks to Fluidcoins.

To get started integrating our multichain blockchain infrastructure into any of your products, simply visit our API documentation. We’re also always available to help answer any of your questions at [email protected].