Blockchain and Ethereum transaction fees, also called ‘gas taxes‘ can vary and fluctuate wildly from moment to moment, costing anywhere from pennies to $200, and predicting them is challenging. Understanding what determines gas fees can be helpful in saving money on any blockchain, especially Ethereum.
Most blockchains are designed for decentralization, and to achieve that they need a financial reward system to motivate individuals worldwide to participate in the operation of the network. How these rewards are distributed differs for mining versus staking, but most blockchain reward systems include fees and tips paid by users. For blockchains that host smart contracts (especially Ethereum), these fees can vary widely depending on the smart contract used. Fees are essential to prevent spam/DoS attacks and tips are necessary because each block has limited space and some transactions are more urgent than others.
As NFT now explains that a blockchain’s gas fee is the fee charged by the network to submit a transaction, and is based on the network’s activity and the size of the transaction. For smart contract blockchains, each machine-level operation in a smart contract accumulates an amount of “gas” units, which are added together and multiplied by “basic fee“(plus one)Tips“) to create the final gas fee, which often results in fees that vary widely in size. Users can accept the fee, or reject it and wait for a better one. On Ethereum, gas fees are valued in Ethereum’s native cryptocurrency, ether (or ETH), regardless of the dollar value. If ETH’s price goes to the moon so will the dollar cost of using Ethereum, which is why layer 2 scaling solutions like Polygon, Arbitrum, and Optimism exist. Ethereum’s infamous gas fees are also why “Ethereum killers” such as Binance Smart Chain, Fantom, Avalanche and many more exist, as they offer similar smart contract functionality to Ethereum without the absurdly high gas fees, but they also lack the huge decentralized application (or dApp) ecosystem that makes Ethereum popular.
Minimize gas charges by beating rush hour traffic
Just like real-life rush hours and crowded highways, timing is critical to getting the best possible service. According to EthereumPrice, weekends are the best time to use Ethereum (and any blockchain), as light network traffic ensures low competition for block space, thus lower fees, and within each day 6am – 12pm (PDT) are often the busiest hours.
For smart contract blockchains, a large part of the gas tax involves “gas units,” which is based on the computational complexity of the transaction. Although extracting data from the blockchain is free, modifying data requires a gas fee, and the gas units accumulated during the modification are included in the final fee. For example, using a sophisticated dApp like Uniswap decentralized exchange (DEX) on Ethereum involves many complex operations, resulting in a gas fee valued in two or three digits, but sending a token or NFT from one wallet to another can cost a few cents to a dollar on the most days.
Blockchain gas fees depend on network activity and the complexity of the smart contract used (if applicable), and are charged in a blockchain’s native cryptocurrency, such as Ethereum’s ETH or Bitcoin’s BTC. Sending tokens or NFTs between accounts is relatively cheap, but interacting with complex decentralized finance (DeFi) dApps and other smart contracts is far more expensive. Users can always see the gas charge before it is charged and can choose to accept or reject it, and if the charge is unreasonably high they can wait for lighter network activity. For Ethereum, Layer 2 scaling solutions like Polygon and Arbitrum can provide cheap gas taxes for users, and should be used whenever possible, but competing blockchains can also offer useful services for even cheaper.
Source: NFT Now, EthereumPrice
