Ethereum gas. High fees on the Ethereum network.

Gepubliceerd op 6 maart 2022 om 11:12

Ethereum is a platform where software developers can build Decentralized applications (Dapps). The cryptocurrency of Ethereum is ETH. To perform a transaction on the Ethereum network (for example, if person A wants to send Ether to person B), a transaction fee must be incurred. On the Ethereum network, this is called ''gas''. What exactly is gas and why are the fees so high?

The Ethereum virtual machine

Ethereum is a platform where software developers can build decentralized apps (Dapps). To understand Ethereum better, it is important to know what exactly an Ethereum virtual machine is. In short, this is a digital environment in which smart contracts can be executed and built. Read more about smart contracts here. Smart contracts is the main technical application on the Ethereum platform.

Ether: fuel of the Ethereum network

The Ethereum network/platform has its own cryptocurrency called Ether (ETH). This is the fuel of the Ethereum network. Each transaction made on the platform is charged a transaction fee. These fees are calculated in gas. Suppose person A sends 1 Ether to person B. From this Ether, certain transaction costs are deducted, the gas. This gas goes to miners who verify this transaction on the blockchain.

Do you get Ether back on a failed transaction?
In case of a transaction that failed, you will not get back the Ether that was used as gas fees. However, your coins will simply remain in the wallet as the transaction is incomplete.

Who earns from GAS?
Ethereum gas basically measures how much work a miner has to do to perform an operation in a certain way. This is important because execution of these calculations must be rewarded with a fee in the form of Ethereum gas.

Why are the gas fees so high?

People who have wanted to send Ether once, I think, know that the transaction fees are skyrocketing. But what is the reason for this rise in costs? It most likely has to do with the popularity of Ethereum. New cryptocurrencies can also be launched and created on the Ethereum network. The memecoins Dogecoin and Shiba are also coins built on Ethereum. Due to the popularity of Ether and memecoins, there is a kind of congestion on the network that makes transaction fees higher.

How to lower the gas fees?

Because of the abnormally high fees, users want to pay less transaction fees. Users can do this themselves. They can lower the gas price themselves. Sounds simple right? It is indeed easy to lower the gas price yourself. But this does mean that it will take a lot longer for your transaction to be processed. Miners decide which transaction they want to process first based on the level of the gas price. A high gas price also means more transaction fees for miners. A low gas price means the opposite. As a result, it takes a lot longer for your transaction to be processed. But if you are not in a hurry, it is better to wait for your transaction to be processed than to pay more transaction fees. 

Duration of transactions
To proceed, we need to briefly consider the concept of Gwei. Gwei is a denomination of Ether (ETH), the cryptocurrency used on the Ethereum network. 1 Ether is equivalent to 1,000,000,000 Gwei. You can think of this as pennies in Euro or Dollars.
If you choose to enter a gas price of 3 Gwei as gas price (gas prices are expressed in the form of Gwei). This generally takes a few minutes. For a gwei of 40/50 or higher it only takes 15 to 20 seconds on average. However, please note that if the network is busy it may take longer.

Always inserting a higher gas price?

Some cryptocurrencies limit their gas prices to a maximum of 50 or 60 Gwei. So it is good to check what gas price a cryptocurrency uses before investing in it. After all, you never want to pay too much. If a cryptocurrency has no maximum, then it is good to consider not investing in it.

An example on how the gas fee is calculated

We can best use a real life example. See screenshot below from Etherscan.

152,767 (gas limit)*119.231095294 Gwei = 18.214.576.734.778,496 Gwei or 0.018214576734778498 Ether. 

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