If you’ve used Ethereum, chances are you’ve encountered the infamous gas fees. Whether you are trying to mint an NFT, make a trade, or interact with a decentralized application (dApp), the fees can often feel like a surprise charge that’s as frustrating as confusing. But why are Ethereum gas fees so high? And, more importantly, how can you lower them? Let’s dive into this mystery and explore the key factors contributing to high gas costs and Why are ETH gas fees so high?
What Are Gas Fees?
In simple terms, gas fees are payments made to miners (or validators in the case of Ethereum’s Proof of Stake mechanism) for processing transactions on the Ethereum network. Gas is essentially a measure of the computational work required to operate, and these fees ensure the Ethereum blockchain remains secure and functional. The more complex the transaction (e.g., executing a smart contract), the higher the gas fee. Gas is priced in gwei, a fraction of Ether (ETH).
Why Are Gas Fees So High?
Several factors drive up gas fees on Ethereum:
- Network Congestion
Ethereum operates in a “first come, first served” model, meaning that transactions are processed in the order they are received, and miners prioritize the transactions with the highest gas fees. When the network is congested, typically during periods of high demand (such as during a token launch, NFT drop, or decentralized finance (DeFi) boom), users compete to get their transactions processed faster by offering higher gas fees. This competition drives up the cost for everyone.
- Smart Contract Complexity
Not all transactions on Ethereum are simple transfers of ETH. Many interactions involve smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. These contracts often require more computational resources than an essential transfer, leading to higher gas fees. Activities like token swaps, staking, and minting NFTs involve complex, innovative contract executions.
- Limited Network Scalability
Currently, Ethereum can only process about 30 transactions per second (TPS), which is far less than the demand placed on the network. This bottleneck leads to slower processing times and higher gas fees during periods of high activity. Ethereum’s scalability issues are one of the main reasons for the rise in fees, especially as the network becomes more widely adopted.
- EIP-1559 Update
In August 2021, Ethereum introduced EIP-1559, an update designed to make gas fees more predictable by introducing a burned base fee with each transaction. While EIP-1559 improved the user experience by allowing users to estimate gas fees more accurately, it also meant that the price for executing transactions could still fluctuate wildly based on network congestion.
How to Lower Gas Fees
While high gas fees can feel like an unavoidable part of using Ethereum, there are strategies you can use to reduce the amount you pay:
- Time Your Transactions
Gas fees are lowest during times of low network activity. Suppose you can try to avoid making transactions during periods of high demand (e.g., during significant NFT drops, token launches, or global events). You can monitor gas prices using tools like ETH Gas Station or Gas Now, which give real-time gas price estimates.
- Use Layer 2 Solutions
Layer 2 scaling solutions like Optimism and Arbitrum help reduce the burden on the Ethereum mainnet by processing transactions off-chain and only settling final states on the Ethereum blockchain. Transactions conducted on Layer 2 networks are typically faster and cheaper, making them an excellent alternative for everyday users who don’t need to interact directly with the main Ethereum chain.
- Batch Transactions
If you need to perform multiple transactions, consider batching them into a single transaction whenever possible. This can significantly reduce your total gas cost since you only pay for one transaction rather than numerous.
- Use Gas Fee Tokens
Some platforms or decentralized applications offer alternatives to paying gas fees directly with ETH. For example, platforms like Loopring allow users to pay gas fees with their native token instead of ETH, which can sometimes be cheaper.
- Choose Less Congested Networks
Some applications allow users to interact with Ethereum-compatible blockchains that offer lower fees. Networks like Binance Smart Chain (BSC), Polygon (MATIC), and Avalanche provide similar functionality to Ethereum but at a fraction of the cost. While they may not offer the same level of decentralization as Ethereum, they’re an option for those prioritising cost savings.
- Set Gas Price Limits
Some wallets (like MetaMask) allow users to set their gas price limits. If you’re not in a rush, you can set a lower gas price, allowing the transaction to be processed when the network is less congested. However, remember that if you set it too low, your transaction may never get confirmed.
Conclusion
While Ethereum’s high gas fees can be frustrating, understanding the factors contributing to them can help you make more informed decisions about when and how to make transactions. By timing your transactions wisely, exploring Layer 2 solutions, and experimenting with alternative networks, you can reduce gas costs and get more out of your Ethereum experience. Gas fees are a part of the Ethereum ecosystem, but with the right strategies, they don’t have to break the bank.
