When you transact on the Ethereum network, you will pay what is called a Gas Fee. These Gas Fees are paid in ETH (Ethereum). These gas fees can be viewed like a transaction fee, similar to how you may pay a surcharge when using a credit card. The difference with ETH Gas Fees though is that they are what helps keep the network running. ETH Gas fees can also vary in price depending on how congested the network is and the price of gas.
Why do ETH Gas Fees Exist?
ETH Gas Fees exist to keep the network running. These fees compensate the Ethereum miners for the work they do in verifying the transactions on the network. These miners consume costs such as energy to verify the ledger and therefore get compensated for this task.
How are Gas Fees Calculated?
The biggest complaints in recent times about the Ethereum network have been the high gas fees users have had to pay. To understand the reasons why, it is important that you understand how gas fees are calculated. The formula is a pretty simple one;
Total Fee = Gas Unit (limits) * (Base Fee + Priority Fee)
The Gas units are how much gas you require to complete a transaction. This will differ depending on what type of transaction you are doing. Moving funds from one wallet to another will likely require a lower amount of gas units compared to minting an NFT.
The base fee is the price of gas at the time. This may be referred to as Gwei (1 billion wei). You may also want to pay a priority fee to increase your position in the queue. The more you’re willing to pay, the quicker your transaction will be processed.
The more congested the network is, the higher the gas fees are. This is because with higher demand, the miners can charge a higher fee for their services. People are also willing to pay more if they have urgency around their transaction going through. The great thing these days is there are a lot of trackers out there that will help you determine current gas fees, and help predict the best times of the day to transact.
Another reason for higher gas fees can be the price of ETH. As gas fees are priced in ETH, if the price of ETH is going up, this can increase the fiat cost of the gas fees.
Failed Transactions
Most wallets or exchanges will automatically calculate the gas required for a transaction. Some wallets will allow you to adjust these settings but this can be risky. The reason this is risky is any transactions that fail on the ETH network will still cost you gas. If you don’t set the gas limit high enough, the transaction will still attempt to go through, use up the gas you had allowed, and then fail. This means you can lose all the gas you were willing to pay and still not have your transaction go through.
Another time your transaction may fail is when minting an NFT project and a “gas war” occurs. This is when people are willing to pay more and more gas to get their transactions to the front of the queue. If someone beats you to minting, your transaction may fail as there is nothing left to mint. This is why it can be quite important to understand the demand around a project, especially if you are purchasing during the minting phase.
How to Reduce Your Gas Fees?
Patience. The easiest way to reduce your gas fees is to be patient when you complete the transaction. When the network is congested, you will pay a higher fee. If your transaction is not urgent, you can just wait for the congestion to reduce and therefore the gas fee to come back down. Other options would be to adjust your priority fee or reduce your gas limit but both of these are risky strategies and should only be done if you have a thorough understanding of how gas fees work.
If you want to know more about gas fees or the Rooshocks NFT project, please don’t hesitate to get in contact with me.
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