What are Ethereum (ETH) gas fees?

If you've looked into Ethereum or Ethereum-related things like NFTs (non-fungible tokens) or smart contracts, you've probably heard of the Ethereum "Gas" fee required. These fees must be paid to operate Ethereum, and here's why.

Transactions cost money

Ethereum is a cryptocurrency, which means people can buy and sell things with it. It is also possible to run complex code on the Ethereum “blockchain”, which is how NFTs and smart contracts are possible.

However, all of these transactions and operations require computer hardware to process them. This hardware costs money. Unlike a centralized bank, there is no data center full of computers dedicated to calculations. All of the processing power used to perform and verify transactions using Ethereum is donated by the miners.

Gas drives the Ethereum blockchain forward

When you pay the “gas” fee on top of the transaction itself, this is the amount of currency the miner will be rewarded with for providing the computing power needed to complete the job. The more effort it takes to complete a transaction, the more you will have to pay.

The gas fee isn't just there to pay for the computing power needed to power the Ethereum blockchain, it's also a way to protect the network from being flooded with malicious transactions aimed at cluttering things up.

Since each transaction costs money, the network is unlikely to be spammed as it costs too much.

Gas costs fluctuate

That being said, computing power is a finite resource, which means the law of supply and demand affects how much gas you have to pay to complete a given transaction. When the network is busy with many transaction requests, users are essentially competing with each other to have their transactions verified first. This “increases” gas charges on the network, which increases the cost of doing business.

This is why some Ethereum users book their trades on weekends or at certain times of the day when activity is low, to shift their trades to a lower price.

The more complicated an operation, such as executing a trade or “minting” and NFT, the more gas it costs. During peak periods, these types of transactions can become very expensive. Some platforms allow you to set a level of gas fees that you are comfortable with and will only execute when prices drop enough. The tradeoff is that you'll have to wait an indefinite amount of time before your request is fulfilled.

Gas is measured in “gwei”

Although gas fees are paid to Ethereum miners, this is not the unit used to measure gas fees. Instead, gas is measured in "gwei". Gwei is the abbreviation of “giga-wei”. One gwei is equal to 0000000001 ether (ETH) which is also worth 1 wei. A single Wei is the smallest possible unit of ether.

So when you see gas prices, don't have a heart attack! It's gwei, not pure ether.

Understanding the Ether Gas Limit

The ether gas limit is the maximum amount of ether a transaction can consume. Users can set a gas limit which ensures that no more than this amount will be used for the transaction. There is a risk in setting your limit too low, as your transaction could be rejected if its limit is lower than the minimum for which the miner is willing to make the transaction.

The gas limit for a standard transaction (just buying or selling something with ETH) is 21 units. Smart contracts and NFTs can go much, much higher. If you set your gas limit higher than the transaction actually used, you will simply be refunded the difference. If, on the other hand, if you set it too low, you run the risk of losing that amount of ether and seeing your trade fail.

Estimating how much fuel your non-standard transaction will need is not an exact science. This is why users often look at what these transactions usually cost (or are charged at the time) and then add 50 or 000 units to it just in case. Remember that there is no risk in setting a limit that is too high.

At the end of 2021, the Ethereum blockchain underwent a “hard fork” called London Upgrade. Changes to how fees are calculated in this upgrade are intended to smooth out gas volatility and make it easier to predict costs. Only time will tell if this is actually the effect it will have. Anyway, if you want to use Ethereum, you have to play the gas game.

Do not confuse gas with gas!

As you will have already understood, the gas costs of etherum have absolutely nothing to do with the costs of the gas used for heating or for industry! The price of etherum gas evolves mainly according to the value of the transaction carried out. On the contrary, the evolution of the price of gas is based on several factors that have nothing to do with the quantity of transactions that we make. Geopolitical situation, speculation, European and international legislation… Unfortunately we cannot have a direct influence on the price of the gas we consume on a daily basis, except on one point: the supplier.

Concretely, there are two indices that set the price of gas in France. There is a tariff for small consumers and a tariff for large consumers. These prices are expressed in euros per kilowatt/hour. The simple consumers that we are also pay a subscription. To compare the gas prices according to the suppliers, it is therefore necessary to pay attention to both the price of the subscription and the price per kWh. Depending on its concrete consumption, the best supplier to choose will therefore not necessarily be the same.

Note also that there are online comparators that allow you to make precise estimates and quickly find a good gas supplier. Don't hesitate to use the Ferret comparator accessible by clicking on the link above. Just answer a few simple questions to compare offers. It's totally free, and it only takes two minutes. there's no reason not to! Especially since since the opening up to competition, anyone can change gas supplier very easily, and above all for free. Read the Ferrets' explanations to learn more about gas prices and suppliers.