What are Ethereum Gas Fees? ETH Gas Explained
by corporate trash
For people new to Ethereum NFTs, gas fees are one of the most puzzling and frustrating parts of getting started. They make an already cumbersome experience even more difficult. You learn what an NFT is, set up your wallet, and decide on an NFT, only to sometimes face surprisingly high transaction fees — or gas fees — upon purchasing an NFT.
In this new NFT beginner tutorial, we will teach you what Ethereum gas fees are, understand why gas fees can be so high, and what the plans are for the future of the Ethereum blockchain to reduce these fees.
What Are Ethereum Gas Fees?
Every cryptocurrency requires a small fee to run transactions on its blockchain, in order to avoid people clogging the network with tons of transactions. Ethereum is no exception.
Ethereum gas fees, or “gwei,” are small fractions of Ethereum. Each gwei is equal to 0.000000001 ETH. For example, instead of saying that your gas fee is 0.000000055 Ethereum, you can say your gas costs 55 gwei. These are payments made by users to pay for the computing power required to validate transactions on the blockchain.
Why do Ethereum Gas Fees Exist?
Ethereum miners are the ones who validate and process these transactions on the network, so the gas fee is awarded to them when they process the transaction.
Transactions with lower gas fees are deprioritized by miners in favor of higher ones. There is a gas limit which is the maximum amount of gas someone can use to submit a transaction, but some transactions are more complicated than others (like swaps) and therefore need higher gas to complete.
Sometimes, a transaction may fail or run out of gas. In this case, the gas fee will still be awarded to the miner, who used computational power in an attempt to process your transaction. When this happens, you may want to set your gas limit higher within your crypto wallet to ensure your transaction is processed.
The London hard fork: Upgrade for Ethereum Gas Fees
In August 2021, the Ethereum network went through an upgrade (known as “The London hard fork”) which changed the way gas fees were calculated. This was an effort to provide more predictable gas fees for users and reduce overpaying on transaction fees.
Before the upgrade, gas fees were calculated as Gas limit (units) x Gas price per unit (gwei). The standard gas limit is 21,000 units, and let’s use an example of 300 gwei. That would equal a fee of 6,300,000 or 0.0063 Ethereum, which all went to the Ethereum miner processing your transaction.
After the upgrade, gas fees get a little more complex, but also improves the entire network.
Small bits of Ethereum are now burned with every transaction in order to keep overall Ethereum supply in check. The part that is burned is called a base fee, so users now need to provide a tip (“priority fee”) as compensation to miners. The higher the priority fee, the better chance you have at success.
Did this upgrade lead to lower gas fees? Not really. But you can set a max fee for a transaction, which is possible in your MetaMask. This allows you to be aggressive while completing a transaction without worry of overpaying. It will only use as much gas as you dictate it can use.
How to Use Ethereum Gas Fees with MetaMask
Let’s use an example of a small transaction on OpenSea. This NFT costs just 0.009 Ethereum. However, the estimated gas fee at this particular point in time (suggested by MetaMask) is 0.02 Ethereum — more than double the cost of the NFT itself! You can always see estimations in MetaMask, or via a third party like Etherscan.
It’s worth noting this gas fee would be the same if the NFT you are purchasing is 100 ETH or .01 ETH. With the Max Fee noted below the total estimate, we could pay up to 0.033 Ethereum for this NFT, depending on demand for miners.
When you click edit, it will show you other options for your gas fee. It defaults to Medium. When you select Low, it will show a reduced gas fee. However, you can see that the chances of the transaction succeeding goes down — hence the “Maybe in 30 seconds.”
So selecting Low means you may pay slightly lower gas, but you’re slightly more likely to have a failed transaction.
For a majority of transactions for beginners, you can use MetaMask’s default low/medium/high settings. My experience is that for many non-competitive mints, swaps and other transactions, these settings work fine. There are advanced options for those who want to be more specific, especially when the network is busy.
Gas Fees Advanced Options on MetaMask
You may want to get more specific with your settings in “gas wars” situations. When we go to Advanced Options and go back to the Medium setting, you can see the exact calculation MetaMask is using to process your transaction, where you can modify the Max Fee.
Remember that gwei equals 0.000000001 Ethereum; it shows you that amount in USD for reference.
As a beginner, don’t worry about these Advanced Options yet. Just know that these options are used to create the single gas fee you see. In the future, you’ll learn about this and also how to mint directly from a smart contract.
By editing each of these settings, you can adjust how much you pay in gas, thus affecting how quickly your transaction is prioritized by miners and processed
Explaining Ethereum Gas Wars
It is important to note that paying a gas fee is not a guarantee for a successful transaction. You can spend plenty of gas on a transaction that never goes through, and you will still pay some gas to the miner. Yep — it can be a bummer.
During a very popular NFT drop or high volume of people swapping cryptocurrency, it leads to very low supply of miners and very high demand. Gas prices can spike extremely high during these times, often called “gas wars” by the NFT community.
In order to combat this and mint the NFT, you need to manually submit much higher than the MetaMask suggested priority fee and/or max fee to have a better chance of the transaction succeeding. However, remember, even this is not guaranteed to work, and you can lose Ethereum with nothing to show for it by competing in gas wars.
It’s the wild west out there! You can use Etherscan’s Gas Tracker to track gas prices and recommended gwei levels at any time. You can read more here to learn about how to “win” — or mint the NFT — in a gas war situation.
Tips to Minimize NFT Gas Fees
This Statista chart shows the history of Ethereum gas prices since 2015. You can see a massive spike in early 2020, when more people were submitting both DeFi and NFT transactions. This increase has generally been sustained, leading to an average gas price of 98.73 Gwei on December 6, 2021.
Within these averages, there are ways to pay less gas fees on your Ethereum transactions. Here are a few ideas to minimize your gas fees when buying NFTs.
Mint when Gas Fees are Low
In order to pay lower gas fees, transactions between 1 a.m. – 3 a.m. UTC (8-10 p.m. EST) or 9-11 p.m. UTC (4-6 p.m. EST) are the lowest fees historically. You can transact during this time to have a chance of lower gas fees, though it won’t always be the case..
However, keep in mind that this chart from Flipside Crypto is from 2020, and Ethereum has evolved and been much more widely adopted in 2021. Crypto is a worldwide, 24/7 operation, so gas fees can turn expensive at any time.
Limit Max Fee
Another tip to minimize gas fees is to make sure you pay attention to the Max Fee that MetaMask suggests. If this is too high for your liking, you can always change this in Advanced Options – but note that your chance of success will likely decrease as a result. It also could take longer for the transaction to process.
Explore other Blockchains
Finally, if you are really sick of Ethereum gas fees, you can try other blockchains with a mechanism that means gas fees are minimal or zero. These include Tezos, Solana, Flow, Polygon, Binance Smart Chain, Cardano, and Wax — among many others.
You can also use a Layer 2 solution like Polygon or Immutable X by transferring an amount of Ethereum to them, and then using super minimal gas fees to transact from there.
The Future of Ethereum Gas Fees
What is Ethereum going to do about these gas fees, you ask? In 2022 (supposedly), Ethereum will move from its currently energy-intensive proof-of-work to a proof-of-stake mechanism, named Ethereum 2.0. This will also come with additional benefits like scalability and cheaper transaction fees.
Proof-of-stake is used by many other blockchains to minimize environmental impact and gas fees. And the switchto Ethereum 2.0 is expected to do the same.
When is Ethereum 2.0 coming?
In order to get to Ethereum 2.0, or Serenity, three steps are still needed to go live.
- Beacon Chain. This went live in December 2020. A “Version 0” of proof-of-stake, it involves staking Ethereum in order to activate validator software. Validators process transactions and create new blocks in the chain.
- Ethereum 1.0 merging with the Beacon Chain. Official proof-of-stake consensus. No more mining — instead, the network is secured using staked Ethereum. This Beacon merge will bring the ability to run smart contracts into the proof-of-stake system, plus the full history and current state of Ethereum.
- Shard chains, a multi-phase upgrade for increased scalability and capacity. Sharding is the process of splitting a database horizontally to spread the load. This will reduce Ethereum congestion and increase transactions per second by creating new chains, known as “shards”.
Ethereum 2.0 aims to solve Ethereum’s major issues like network congestion, lack of space, and high electricity usage, all while keeping Ethereum decentralized. Step 2 is not expected to happen until mid 2022.
Okay that’s great, but will it solve high gas fees anytime soon? Unfortunately, it may be years before Ethereum 2.0 has scaled and gained enough efficiencies to substantially reduce gas fees. You can learn more on the official Ethereum 2.0 website.
The tl;dr of Ethereum Gas Fees
Getting involved with Ethereum NFTs is really fun, but it comes with a steep learning curve. Gas fees help protect the network from being oversaturated, but they can be extremely pricey, hard to understsand, and frustrating for beginners and experts alike.
There are some ways to try to reduce what you spend in gas fees, but for the time being, high gas fees are the cost of transacting on Ethereum.
Other blockchains exist with much lower gas fees and phenomenal creations, so those are great options for people who want to avoid high fees. In addition, Ethereum 2.0 should scale in a few years so high gas fees and proof-of-work are a thing of the past.
For the sake of our wallets, we can only hope.
Read more beginner NFT articles from Corporate Trash on MomentRanks:
- How to Set Up your Wallet for Buying NFTs
- What are NFTs? NFTs Explained for Beginners
- How to Choose your First NFT to Buy
- A Beginner’s Guide to Solana NFTs