Ethereum Gas Fee explained : Why is it high?

Brief Summary Of Ethereum

Dapps mostly utilize Ethereum's Blockchain for their activities. The Cryptocurrency "Ether(ETH)" is the native currency for Ethereum and is the second largest crypto based on market capitalization. Ethereum has an open source blockchain network that enables creation and execution of transactions with smart Contracts.

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Transaction processed within the Blockchain framework requires algorithmic power. This algorithmic power is referred to as "Gas", just like how cars and other automobiles uses gas to run, the same applys to crypto whereby the associated costs to complete a transaction requires gas fee. For better understanding of Ethereum's high gas fee, let's dive into gas fee domain.

What is gas fee?

Gas fee is the algorithmic power needed to process/complete a contract or transaction. It's the financial charges associated with the algorithm. Gas fee are calculated in Gwei, a decimal percentage of Ether. 1 Gwei is approximately 0.000000001 Ether.

Gas is the fee paid to use a type of Blockchain Network. When a user submit a request on the Blockchain, he/she is is competing with other already submitted transactions for a miner to verify their request to be included in the Blockchain.

Every Blockchain has a limit to the number of transactions per block, Ethereum has an equivalent of 12.5 million units of gas, and once that value is reached, the block will be closed and a new block Will be created.

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How are gas fees calculated In Ethereum?

A trader can be asked to include a certain amount of gas price when they send a transaction request to the Ethereum network, then Miners ( the Decentralized network of computers that validate transactions) can choose which transaction they will process first.

However, the Miners give priority to requests with higher gas fees. With increased number of transaction requests sent, the Crypto gas fee will also be increased. A user can choose to send a request with a lower gas fee if cost is his concern.

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Ethereum network can allow a user to adjust the gas limit higher when cost is not their concern. users can set the gas limits to, slow, average or fast when submitting requests. Gas limit can also be manually set by using expert features mode when desired.

Why Are Ethereum Gas Prices So Expensive?

Ethereum Blockchain uses Proof Of Work(PoW) consensus mechanism which Miners use their algorithmic resources to solve mathematical puzzles. The Miner that first solve the puzzle will get the opportunity to add transactions in a block.

However, Miners have to get a return for investing their algorithmic resources for transactions of users, and that is the Gas Fee. Users will pay a certain amount of gas fees to Miners for including their transactions into the block.

More reasons for Ethereum high gas fee is because it's one of the most used Blockchain. There's a lot of movement in the Ethereum chain that makes the block full and transactions fees can Spike with each rise in demand.

Ethereum Gas fee aren't astronomical as you may think, it has spiked to extremely high levels during it peak periods in the past like DeFi summer of 2020 and the 2017 ICO boom. During those times, the value of Ethereum and proposed projects skyrocketed which results to congestion in the Ethereum network.

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Methods for Reducing Ethereum Gas Fees

Until Ethereum plans of moving to Proof Of Stake (PoS) is achieved. We have to find ways of reducing ga fees on Ethereum Blockchain. Here are some point I've written out.

• Classify the Transaction Types

A way of reducing Ethereum Gas fee will refer to the classification of transaction types. Gas fee differ according to different types of transactions. For example, let's say you have two Ethereum address with 500 tokens in each account. Now your plan was to lock all the tokens in a new Decentralized app. What are we to do to reduce Ethereum's Gas Fee? The simple answer is to transfer all to one address, then lock the 1000 tokens in a single transaction and save fee.

• Use Gas Tokens

A second recommendation for reducing gas fees would be to use gas tokens. By deleting the storage variables on Ethereum network, the users can collect refunds In ETH, which then lead to the foundation of gas tokens.

Surprisingly, a user would be able to mint a considerable number of gas tokens in scenarios With awfully low gas fees. The gas token can be redeemed to obtain Eth sometimes when you set the execution of transactions on the network. This redeemed ETH could easily help reduce Ethereum's Gas Fee.

• Keep Track on Network Congestion

A users transaction can be put on hold when the number of transaction in the Blockchain is much, As the transaction is on hold, gas fee might increase. So your estimated gas limit would most likely fall below the initial rate during the execution process. This problem could lead to possible loss of your gas fee for an unfinished transaction.

In order to tackle this, keep track on Ethereum gas fee charts to analyze trends and plan your next move. My suggestion is to ensure you make transactions around non peak times. You could also use Ethereum Toots to get an accurate estimate of gas fees which helps to set the perfect gas limit.

Ethereum plans to move to PoS Mechanism which is said to reduce the network gas fee, until then we have to keep using any means we can to lower gas fee on transactions to increase profits. If you want to know more about Ethereum, read my previous post in Crypto academy. Thanks for reading...⭐

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