Ethereum is great. We can buy and sell NFTs and we can be our own bank by swapping, lending, borrowing, and staking tokens. Everything could be fine. Well, if only there were no gas fees.
Yes, gas fees on Ethereum can ruin a good trade. So it is no surprise that people are trying to minimise those fees. Possible way outs are Layer 2 solutions like Arbitrum and Optimism or side chains like Polygon. However sometimes the transaction has to take place on Ethereum; current skills on RabbitHole are such examples.
What are gas fees anyway?
In simple terms, gas fees are paid for computer power.
Computer power is required whenever transactions involve a smart contract that has to be executed (e.g. minting an NFT). More simple transactions like transferring ETH to another wallet require gas as well.
Gas is also an incentive for miners to secure the network and add executed transactions to a block on the blockchain. Depending on the amount of gas you are willing to spend this can happen faster or slower. However in the worst case the transaction fails and ETH is lost.
How are gas fees calculated?
Gas is usually denominated in gwei (=1 giga wei). 1 wei is the smallest unit of ETH. 1 ETH is 10^18 wei or in other words 0.000000000000000001 ETH represent 1 wei. So 1 gwei is 0.000000001 ETH.
Wei is referring to Wei Dai, a computer engineer who formulated the concepts of modern cryptocurrencies.
A wallet application like Metamask is displaying gwei and the expected costs before approving the transaction. So this is the last moment you can decide if you actually want to confirm the transaction.
Usually the term gas fee is used to describe the complete transaction costs. However the actual gas fee consists of two parts:
The first part is fixed and is called gas price. The gas price is the cost per unit computer power that is specified for the transaction (e.g. swapping tokens).
The second part describes the actual gas fee and is variable. It consists of a network base fee at the time of the block. Also it includes a gas limit which is often set automatically by the smart contract you interact with. But it can be changed by you. Warning: You should only do this if you know what you are doing!
In the screenshot you can see an example taken from Etherscan. It is the minting of an NFT.
Can I reduce gas fees?
As I have mentioned the actual gas fee is not fixed. It is dependent on the time of the block which your transaction is allocated to.
Gas fees fluctuate throughout the day and week. When the network is congested fees are higher than when there is not much traffic. Just think of rush hours when commuting. It is basically the same situation.
So when are gas fees low? For a general overview you can head to ethereumprice.org. It features a nice chart - set to your local timezone - of gas fees of the last two weeks. This chart should give you a basic idea of when to schedule your transactions.
As you can see from the image above gas prices have been rather low this week.
For real time gas fees I recommend checking the gas tracker on Etherscan. Other trackers you can try:
With the mentioned tools you should be able to reduce costs and make your Ethereum experience more pleasant.
Cover photo by Dawn McDonald on Unsplash