What is Gas in Crypto?

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What are gas fees, and why does a transaction cost so much?  What is a Gwei and why do I have to pay it? Read on to find the answers to these questions and more.

 

 

December 6th 2021| Mike Humphrey

 

What is Gas in Crypto

Gas fees are the cost that users pay to have their transactions validated on the blockchain.  Supply and demand determines the current gas rate.  When demand is high fees are high.  When demand is low fees are low.  Rates fluctuate in real-time, based on the number of transactions waiting to be validated on the network.  Etheruem has two validation systems, Poof of Work (PoW) and Proof of Stake (PoS).  Each validates transactions in different ways.  PoW uses crypto miners to approve transactions, and PoS uses Ethereum staked by investors.  In both cases, gas fees are paid in exchange for validating transactions.

What is Gwei

If you have ever created a transaction on Ethereum, you may have noticed that gas prices are shown in Gwei.  Gwei is the smallest possible unit of Ethereum.  1 Gwei is equal to 0.000000001Eth or 10^(-9) Eth.  Conversely 1 Eth is the equivalent of 1 billion Gwei.  Gwei is a useful denomination for calculating Ethereum gas prices.

How to Check Ethereum Gas Prices

Before sending a transaction, you may want to check the current gas prices.  There are several websites that monitor the current and historical gas prices on the Ethereum network.  If you are performing transactions on the Ethereum mainnet where fees can be quite high it’s worthwhile looking for optimal time windows.

These sites can also be very useful when using wallets like Metamask that allow users to choose how much gas they wish to pay.  They will give you an idea of the range of prices you should be looking to pay at any given time.

Metamask Gas Fee Settings

When performing a transaction using a Metamask wallet, the gas fees are automatically chosen for you. To modify the recommended rates click on edit above the gas fees in the approval window.

 

If you are going to decrease the gas price, it’s recommended that you double check one of the sites above, to see whether your settings are too low.  Network congestion and low fees are causes of stuck transfers.  If you have set your gas price too low, your may have to fix a stuck transaction.

FAQ

Why Are Ethereum Gas Prices So High?

Ethereum gas prices fluctuate based on demand.  The more people looking to perform transactions at the same time, the higher the gas price.  If you are looking for lower gas prices, try using Etheruem during non-peak hours, or look at using one of the many layer 2 options.  Layer 2 solutions use different techniques to lower prices and increase speeds. Polygon, Avalanche, Fantom and Optimism are several of the many solutions currently available.  Thinking of moving to Polygon, read our Polygon Bridging Guide.

What is ETH 2.0 and will it decrease gas fees?

Eth 2.0 is the transition of Ethereum from Proof of Work (PoW) to Proof of Stake (PoS).  Proof of Work requires crypto miners to use computers to solve mathematical equations in order to validate the block chain.  Proof of Stake on the other hand validates transactions with staked Ethereum.  The transition to Eth 2.0 is expected to decrease gas fees.  Validators will no longer have to pay for energy intensive mining, which reduces the cost required to validate transactions.  This being said, currently there is only a small portion of Eth staked, and there will likely be a spike in gas fees during the transition, until sufficient Eth has been staked.  Like PoW, supply and demand will dictate the amount of Eth staked vs gas fees.  As demand increases high gas fees will be paid, which increases the return on staked Eth, making staking a more attractive investment.

 

Have you staked an Ether? Let us know in the comments

 

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