Fuel comes in different forms—it could be the cup of coffee we drink before we start our day, the morning workout to release dopamine and endorphins, or… well, the gas that makes a car go vroom. And just like how humans and cars need their fuel, so does the Ethereum (ETH) blockchain. For this particular digital asset, its energy source is called Ethereum Gas.
What is Ethereum gas?
Ethereum gas is essentially the costs or fees for making transactions on the Ethereum blockchain. The tricky part, however, is that Ethereum gas prices aren’t fixed. The amount of gas required for each transaction depends on how complex the exchange is.
For example, a simple transfer could cost you 21,000 gas (the minimum requirement for every transaction). On the other hand, a more complicated one, such as the ones used in decentralized finance (DeFi), could set you back 1,000,000 gas.
Each unit of gas has a price denoted in gigawei (gwei) or nanoeth. A gwei equals 1,000,000,000 wei, which is the smallest Ether unit base. To give you a better idea of the conversion to Ethereum, one wei is equal to 0.000000001 ETH.
Think of it as Ethereum’s version of satoshis. Let’s say that the price of gwei is 5. In that case, a 21,000 gas transaction would cost 21,000×5 = 105,000 gwei (0.000105 ETH).
Essentially, gas is used by the Ethereum Virtual Machine (EVM), the digital mechanism behind the cryptocurrency, so that decentralized applications can run and self-execute smart contracts in a secure and decentralized fashion. They’re your way of compensating miners who use their computational power to process and validate your transactions.
Why ETH gas fees fluctuate
In most cases, Ethereum gas and fees are mainly determined by the supply and demand between the network’s miners. This means that they can decline a transaction if the gas price doesn’t meet their standards. It also means that the cost of gas fluctuates with the supply and demand for processing power.
This is where the “Ethereum gas limit” comes in. “Gas limit” refers to how much you’re willing to spend on a transaction. Setting a higher gas limit lets you tell the Ethereum miners that there’s more work to do for a transaction. At the same time, miners can ignore your transaction if you set the gas limit too low. This is why are gas fees so high on a particular day and time.
Another possible reason ETH gas prices fluctuate is because of whales—wallets that hold over 20 ETH (around 65,000 USD at the time of writing).
By looking at charts at the points when both spikes coincide, it can be correlated that the fees increase when these whales make transactions. The times when the network is least busy is the time when Ethereum gas fees are lowest. Although we can’t be certain that they’re the main reason why prices surge, it can be deduced that they play a significant role.
When are ETH gas fees lowest?
Looking to save money on your Ethereum transactions? Well, you’re in luck. We studied Ethereum gas charts and found the best times to transact.
The busiest times and the most expensive times are on weekdays from 8 AM to 1 PM (EST). This comes as no surprise because Europe and the US are all fully awake and at work during that period. On weekdays, ETH gas price is lowest from midnight to 4 AM (EST)—when most of America is asleep, Europe is just about to start their day, and Asia is finishing up their workday.
The best time to make an ETH transaction is on a Saturday or Sunday from 2AM to 3AM (EST)—that’s when ETH gas prices are at their lowest. On the other hand, the worst times are on Tuesdays and Thursdays, when the network is at its busiest and gas prices are at their highest.
|Day||The time when ETH Gas is lowest (EDT/EST)|
|Sunday||2 AM to 3 AM|
|Monday||1 AM to 2 AM|
|Tuesday||6 AM to 8 AM|
|Wednesday||11 PM to 7 AM|
|Thursday||1 AM to 3 AM|
|Friday||10 PM to 8 AM|
|Saturday||2 AM to 3 AM|
All this data means that if you hold off a bit on your transactions or send lower fees for low-priority transactions knowing that they’ll be confirmed in a few hours, you could save some gas in the process.
With the price spikes of Ethereum (and with it, its rising fees), it might be worth looking into how you could save some gas. Find the best times to buy Ethereum and then plan them accordingly. Who knows? It could save you a lot of money.
Potential solution to the Ethereum gas problem
As unique as it is to Ethereum, gas fees raise a couple of concerns for ETH users. Despite how high fees can get, it’s a standard feature on the Ethereum network. Granted, there are extra steps one can take to avoid these high fees, but it’ll require a lot of education and patience.
The high gas fees affect many great things on the ETH network—ERC-20 token purchases, micropayments, NFT markets, and more.
To put this into a real-world example, let’s say that you’re looking to get yourself an NFT that’ll set you back around 100 USD. Would you be able to justify that purchase if the gas fees are just as expensive as the actual NFT? In this case, you’d probably think twice and possibly try to save on fees.
Given that gas fees are becoming a problem on the ETH network, what could possibly solve it? One solution could be to add a Layer 2 solution. Digital ledgers like Bitcoin and Ethereum are inherently flawed in that transactions tend to slow down the more people use them.
Adding a Layer 2 solution on top of the Ethereum network could take transaction data off Ethereum, compress it, and publish it onto the blockchain for a fraction of the time and cost.
Think of how well the Lightning Network has worked with Bitcoin. Ethereum having a Layer 2 solution of its own could make ETH transactions more cost-effective.
*Disclaimer: The content of this article is for informational purposes only. The opinions expressed here are not meant to be taken as financial, investment, or any other advice, nor do they express the opinion of Paxful.
*This blog was originally published on March 26, 2021 and updated on January 21, 2022.