What Are Gas Fees?

Gas is the fee you pay to move anything on Ethereum, and you cannot opt out, because charging for every action is the whole idea.

The annoying part is that the fee is never the same twice: the very same transfer might cost 30p this morning and 25 pounds tonight, for no reason you did anything about. This explainer says why that happens, and how to pay less. Not financial advice.

What a gas fee actually buys

A gas fee is nothing more exotic than the charge to get your transaction into a block.

Ethereum is a blockchain: a shared ledger copied across thousands of machines, with new entries packed into blocks. Those blocks have a fixed size, so the moment more people want in than there is room for, the price to get included starts climbing. You are buying two things at once, the space itself and the work to run your transaction.

Light jobs cost little and heavy jobs cost more, so here is the rough order, cheapest first:

• Sending ether to another address, the lightest job there is.

• Sending a token like USDC, which runs a bit more code.

• Swapping one token for another, often two steps and two fees.

• Minting an NFT in a crowd, the heaviest of the lot and the one that goes feral.

Miners, now validators, do the work and take the fee, and without a fee there is no transaction confirmation: your transfer just sits in the queue until you pay enough to get picked up. Other networks call the same charge a network fee, which is the same thing under a plainer name. Ethereum says gas because it meters the work the way an engine burns fuel.

Why the price jumps around

Block space goes to the highest bidder: everyone wanting in at the same moment is bidding against everyone else, and the wallets willing to pay most get loaded first. On a quiet Sunday you pay little, and during a big launch you fight a crowd. Demand sets the price, not Ethereum, and demand is spiky.

It gets ugly fast: through DeFi summer in 2020 and the 2021 bull run, a single swap on a busy day could cost 50 to 200 dollars in gas, sometimes more than the trade itself was worth.

Bots make it worse, bidding the price up automatically and faster than any human at a keyboard. The textbook case was Yuga Labs' Otherside land sale on 30 April 2022, a mint that broke Ethereum for a day and had people paying hundreds of dollars per transaction. The cruel bit is that you pay gas even when a transaction fails, and plenty failed that night, which left people with the money gone and nothing bought.

Gwei, and the actual sum

Gas is priced in gwei, and one gwei is a billionth of an ether, so you never pay whole ETH for a fee, you pay a heap of gwei.

The maths has two parts to it. Each action uses a set number of gas units, with a standard ETH transfer fixed at 21,000 gas and heavier actions using more, and then there is the gas price in gwei, which floats with demand. Multiply the two together and that is your fee: gas used times gas price.

Take that standard transfer and its 21,000 gas. At a calm 15 gwei the fee comes in under a pound, but wait for a spike to 150 gwei and the very same transfer costs ten times as much. Same coins, ten times the bill.

How a fee is built since 2021

On 5 August 2021 a change called EIP-1559, part of the London upgrade, reworked the whole thing. Before it you guessed a price and hoped: overbid and you overpaid, underbid and you waited for hours, sometimes forever.

Now a fee comes in two parts rather than one guess. There is a base fee, set automatically by the network from how full recent blocks were, and it gets burned: destroyed, taken out of circulation, paid to no one. On top you add a priority fee, a tip to jump the queue, so the sum is base fee plus tip, times gas used. Millions of ether have been burned this way since, gone for good.

How to pay less gas

There are three moves, in order of how much they help.

First, time it. Gas tracks the working day and the headlines, so weekends and early European mornings tend to run cheaper, when fewer people across the US and Asia are trading at once. If there is no rush on your transfer, wait for a quiet hour.

Second, the big one: use a Layer 2. These are separate networks like Arbitrum, Optimism and Base that bundle thousands of transactions cheaply and post a summary back to Ethereum, giving you the same ether and the same apps for a sliver of the fee. A swap costing 30 dollars on Ethereum can cost pennies on one of them, which is why so much ordinary activity has drained off the main chain.

Third, look before you click: a gas tracker shows the going rate in gwei and whether it is high right now, thirty seconds of checking that saves you the nasty surprise.

Bitcoin has fees, but no gas

Bitcoin charges you too, but the word gas does not fit. Bitcoin runs no smart contracts, no app code to execute, so there is nothing to meter like an engine and what you are paying for is space, full stop.

A bitcoin fee is priced roughly by the size of your transaction in data, counted in satoshis per byte, a satoshi being the smallest slice of a bitcoin, so a bigger transaction means more bytes and a higher fee. It still climbs when the network is busy, and it spiked hard in 2023 when the Ordinals craze stuffed the blocks with images and shoved ordinary transfers to the back of the queue. No Bitcoiner says gas though, they say network fee, or just the fee, and the same story holds when you buy bitcoin: the moment you move it, you pay.

The Merge did not make gas cheaper

One myth deserves killing off before we finish. In September 2022 Ethereum went through the Merge, dropping energy-hungry mining for staking and cutting its power use by about 99.9%, and plenty of people assumed cheaper energy would mean cheaper fees.

Wrong. The Merge changed how the network is secured, not how much room sits in a block. Gas tracks demand for that room, the room did not grow, so fees barely moved. Layer 2s are what cut your costs, not the Merge, and anyone telling you otherwise has it backwards.

Treat gas as the price of using a shared computer at a busy hour, because that is exactly what it is. Read a tracker before you commit and push anything non-urgent onto a Layer 2, and the fee stops being a shock and turns into a number you glance at, like a train fare before you board.