Originally published on March 26, 2021 and updated on September 27, 2024
Just like a car needs its fuel and humans need food for energy, the Ethereum (ETH) network needs gas to facilitate its transactions. Ethereum gas is an essential part of the network and most of the time, it can get expensive (to say the least).
Ethereum gas is essentially the costs or fees for making transactions on the Ethereum blockchain. Gas is used by the Ethereum Virtual Machine (EVM) so that decentralized applications can run and self-execute smart contracts in a secure and decentralized fashion. They’re your way of compensating stakers who validate your transactions.
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.
Key takeaways:
- Ethereum gas prices are lowest during off-peak hours, especially from midnight to 4 AM (EST) on weekdays and between 2 AM and 3 AM (EST) on weekends. The busiest and most expensive times are weekdays from 8 AM to 1 PM (EST), particularly Tuesdays and Thursdays.
- Gas fees fluctuate due to network congestion, transaction complexity, and high demand times. Whales (large wallet holders) can also influence gas prices by making significant transactions.
- The introduction of EIP-1559 has made gas prices more predictable by separating fees into a base fee (burned to reduce supply) and a priority fee (paid to validators). This change improves transparency and reduces volatility.
- Users can plan transactions during low-demand periods to lower transaction costs, explore Layer 2 solutions (e.g., Arbitrum, Optimism, Polygon), or use tools like Etherscan and Metamask to monitor real-time gas prices.
What purpose does Ethereum gas serve?
The primary purpose of Ethereum gas is to incentivize miners or validators to process transactions on the network. Miners are rewarded with newly minted ETH for verifying and adding blocks to the blockchain. The gas fees collected from users help cover the costs of running these mining operations and ensure the network’s security and efficiency.
Additionally, gas fees act as a deterrent against spam and malicious activity. Without gas fees, bad actors could flood the network with useless transactions, overwhelming the system and slowing down legitimate transactions. By requiring users to pay a fee for each transaction, gas fees discourage such behavior and help maintain the network’s integrity.
Why do ETH gas fees fluctuate?
Gas fees on the Ethereum network can fluctuate significantly, impacting users conducting transactions. The recent changes in Ethereum’s protocol, including upgrades like the transition to proof-of-stake, have also influenced ETH gas fees.
Network congestion
As users engage more with the Ethereum blockchain, network congestion and the popularity of specific decentralized applications can also drive gas prices up or down. When many users try to transact simultaneously, the cost increases, like a toll road during rush hour.
Another possible reason ETH gas prices fluctuate is whales—wallets that hold over 20 ETH. Ethereum gas fees increase when these whales make transactions.
Transaction prioritization
In most cases, Ethereum gas and fees are mainly determined by the supply and demand between the network’s validators. 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 validators that there’s more work for a transaction. At the same time, validators can ignore your transaction if you set the gas limit too low.
Daily variations
Typically, gas fees peak during business hours in regions like North America and Europe due to higher activity. This is why you’ll notice in ETH gas price charts that fees are so high on a particular day and time.
Why is the EIP-1559 a game-changer for Ethereum gas fees?
Before EIP-1559, Ethereum’s gas fees were determined through an auction system. This meant the highest bidder’s transaction was prioritized for inclusion in the next block. This often led to unpredictable and volatile gas prices, especially during high network congestion.
EIP-1559 introduced a significant change to this system. It separated gas fees into two components:
- Base fee: This fee is automatically adjusted based on network congestion. This burning mechanism reduces Ethereum’s circulating supply and potentially increases its value.
- Priority fee: This fee is paid to validators to incentivize them to include your transaction in the next block. A higher priority fee means your transaction is more likely to be included.
This new system has several benefits:
- Predictability: EIP-1559 has made gas prices more predictable by introducing a base fee automatically adjusted based on network conditions.
- Transparency: The separation of base and priority fees makes it easier for users to understand the factors influencing transaction costs.
- Reduced volatility: The burning of base fees can reduce the volatility of Ethereum’s price.
How to calculate Ethereum gas fees
To calculate ETH gas fees, you must add the base fee and priority fee then multiply the sum by the gas limit:
Gas Fee = Gas Limit × (Base Fee + Priority Fee)
Gas limit is the maximum amount of gas a user is willing to spend on a transaction. For simple transactions, the limit is typically around 21,000 gas units. More complex operations, like smart contract interactions, can require significantly more.
Tools to check gas prices
Several tools provide real-time gas price data for Ethereum transactions.
- Etherscan: This blockchain explorer offers current gas prices and recommended gas prices for fast, standard, and slow transactions.
- Gas station network (GSN): This tool displays average gas prices and helps users determine the most efficient price to minimize costs.
- Metamask: The wallet includes features that automatically suggest gas prices based on network conditions. Users can adjust these recommendations to suit their preferences.
Utilizing these tools enables users to assess market conditions effectively, optimizing their Ethereum network transaction costs.
Why are Ethereum fees so high?
One thing that makes ETH gas computation so tricky is that it’s never been a fixed price. The amount of gas you’ll need to pay will depend on how large or complex your transaction is. For example, a complicated transaction could easily set you back 1,000,000 gas, while a simple transfer would cost only about 21,000.
Source: ethereumprice.org/gas/
Another factor in high ETH gas fees is the time of day of the transaction. The more people transacting, the more congested the network becomes, resulting in higher gas fees. The worst time to transact is during weekdays, when the network is at its busiest and gas prices are at their highest. ETH gas fees are highest on Tuesdays and Thursdays from 8 AM to 1 PM (EST), this is unsurprising because Europe and the US are all fully awake and at work during that period.
When are ETH gas fees the lowest?
On weekdays, the ETH gas price is lowest from midnight to 4 AM (EST)—when most of America is asleep, Europe is just about to start its day, and Asia is finishing its workday. The best time to make an ETH transaction is on a Saturday or Sunday from 2 AM to 3 AM (EST)—when ETH gas prices are at their lowest.
| 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 |
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.
How to reduce Ethereum gas fees
Now that you know why gas fees are so high, you can work around them to make the most out of your transactions. Mainly, there are three cost-saving solutions for Ethereum’s rising gas fees:
- Plan ahead: One of the first things you should do to reduce your Ethereum gas fees is to plan your transactions to coincide with a decongested network. As mentioned earlier, the best time to transact on the Ethereum network is midnight over the weekend.
- Try a layer 2 solution: Just like how Bitcoin has the Lightning Network, Ethereum also offers layer-2 solutions—networks built on top of a blockchain to help boost capability, offload work, reduce congestion, and avoid single points of failure—that allow you to get the lowest ETH gas fees. In the world of Ethereum, these are called Rollups. If you want to explore these solutions, check out Arbitrum, Optimism, Polygon, or Loopring.
- Use tools to calculate your gas fees: Another tricky thing about gas fees is that you won’t know the actual cost until you complete your transaction. Most people will just wing it and worry about the gas fees later. To see how much you’ll pay before making your transaction, some applications will give you an idea of what gas fees will look like. Apps like DeFi Saver will let you simulate your transaction and show you the gas fees in real-time. Simulating it before making the transaction gives you a better idea of your costs.
- Gas-saving mechanisms can include adjusting gas limits manually to avoid overpaying and minting gas tokens when fees are low to redeem them when fees are high.
- Use transaction bundling. This refers to grouping multiple transactions together to execute them in one block. This approach can significantly reduce gas costs for users who regularly perform small transactions. Some benefits of bundling include Economies of scale leading to lower average costs per transaction and reducing the overall load on the Ethereum network.
This might interest you: What is the Best Time to Buy Ethereum?
Ethereum’s unique 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 you’re looking to get yourself an NFT that’ll set you back around 100 USD. Can you justify that purchase if the gas fees are just as expensive as the actual NFT? In this case, you’d probably think twice and try to save on costs.
With future Ethereum upgrades on the horizon, users remain hopeful that gas fees will eventually be reduced. When that upgrade comes, we’ll just have to wait and see. Right now, we have to play with the hand we’re dealt.
*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.
