What is Gas Fee? How to Calculate Ethereum Gas fee and optimise your gas fee.

Hello guys,
It's another day to look at a very interesting topic which will help us all as crypto traders. I know most of us only trade the Steem token but I also believe that before trading it you sometimes convert to other tokens before converting to your country currency or fiat.

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Here in Nigeria, one of the most used exchange 💱 is the Binance exchange but because of the removal of P2P, most of us only send our Steem there and then convert to other token and then send to another exchange like Kucoin since Kucoin still does P2P but has no Steem in it.

Now, every wise and successful trader will always look for ways to minimise loss while he or she is maximising profit. So this is what lead us to our today's discussion What is Gas Fee? A Guide to Optimizing Gas Fees Effectively.

A lot of you may have known what these is all about but for the benefits of those who don't know I will explain in a clear and simple language so that you too will understand so as to minimise your losses and maximise your profit.

What is Gas Fee?

When you go out to make your hair, the person making the hair will charge you some money as a fee for that very function he or she is about to perform for you and that charges is what we call the service charges. You are paying for the time and the work the person is going to do for you.

In the same way, just like every other sector, the blockchain sector also has some money they charge which is like service charges for work done and these service charge is what we call the gas fee. So for every transaction within the blockchain, there is always a service charge attached.

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The gas fee is necessary because the money is use to maintain the steady flow of the blockchain so as to serve others as well. So every transaction done in the blockchain comes with a gas fee. The joy here is that most of the gas fee are fixed such that even if you are doing large or small transaction you will still pay same amount.

In Ethereum blockchain the gas fee is calculated in “gwei” which means that (1 Ether = 1,000,000,000 gwei). So here those involve in the transaction can determine how fast the want their transaction to be executed by paying more service charges. The higher the service charge paid the faster your transaction is executed and the lower your service charge the slower your transaction.

So this means that in the Ethereum blockchain there is a room for one to pay a higher gas fee and there is also a room for one to pay a lower gas fee. Remember there is always a threshold you can't go below when it comes to the payment of this gas fee but if you want your transaction to be processed faster then you will have to pay more gas fee.

Why Gas Fee is Needed

Just like those who render their services collect charges for their work done, so also the blockchain needs charges to maintain its function ability. Without gas fee in the blockchain, there will be much abuse of the use of the platform because people will begin sending large or unnecessary transaction for the system or miners to validate thereby causing congestion in the network.

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Paying a little thing for service charges or gas fee makes it look more beautiful and matured because people will only come to do serious business knowing that they will also be charged a little thing for the task of processing their transaction.

So the gas fee generated are means of payment to the miners on the blockchain who help to validate the various transactions. So it is important to always pay this gas fee at all time. Here in the Ethereum network which we are using as case studies, one can adjust his or her gas fee depending on how fast or slow he wants the transaction to be executed. So the higher the service charge the fast the transaction and verse versa.

Parts of gas fee

Gas fee consist of two parts and they are gas limit and gas price. These two parts are what makes up the gas fee. So let's look at them one after the other for better understanding and clearification.

Gas limit as the name implies, it is the maximum limit of gas which every user is willing to spend to get his or her transaction executed. This means that a user can't go beyond this limit as it is the maximum. When the gas limit is higher it means that the transaction is a complex one and also the resource in use will be capital intensive.

So your gas limit matters a lot because if your gas limit is lower than what the transaction needs to get executed, then your transaction won't be executed because the gas limit is low and if the gas limit is high it mean your gas fee will also be much as it is a complex transaction.

Gas price on the other hand is the amount which every user is willing to pay for any gas use in the transaction process. In the Ethereum blockchain the gas price is measured in Gwei.

So the higher the gas price the faster your transaction is being executed and the lower the gas price the slower your transaction is been executed. So miners here prioritise those with high gas price first before those with low gas price.

Let's take an example to explain.

In Ethereum blockchain we use Gwei

1 Gwei = 0.000000001 ETH

So this means that if your gas fee is 0.000000001 ETH, you can say my gas fee is 1 Gwei. This is all one and thesame thing.

Having understand that, let's look at an example below.

Example: If the Gas Limit of Ethereum is 21,000 and the Gas Price is 106 Gwei, now what will be the gas fee.

Given

Gas limit = 21,000

Gas price = 106 Gwei

Gas fee = Gas limit x Gas price

Gas fee = 21,000 x 106

Gas fee = 2,226,000 Gwei

Gas fee = 0.002226 ETH

So for the above example, if the user is to pay for this transaction, he will either pay 2,226,000 Gwei or its equivalent which is 0.002226 ETH

Ethereum blockchain and other blockchain

Based on my personal experience, I want to make a little analysis between the Ethereum blockchain gas fee and other blockchain like the Tron blockchain chain. As I have said earlier, since the P2P of Binance was removed in Nigeria, we have to convert Steem to other token and then send it to other exchange.

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I usually convert Steem to TRX to send as the blockchain only charges 1 TRX for any amount of TRX you are sending out. So this is how the Tron blockchain works. Seeing that TRX price was increasing I felt losing one TRX as service charge or gas fee is much so I decided to convert the asset to Shiba.

Shiba is a token built on ERC-20 which means it was built on the Ethereum network. Shiba price is relatively very low and I thought the charges will be 1 Shiba as well but when I went to do the transfer o saw the amount of Shiba that was needed to execute the transaction and when I compared it to the amount or cost of the Tron blockchain I notice it was far better.

So please before doing any transaction compared the gas fee on the different blockchain and see which is lesser and then use that one for your transaction. I have seen the difference and I guess the Tron blockchain is still relatively the cheapest at the moment.

Conclusion

Gas fee is an important part of any blockchain as it is the money that helps to run the blockchain and also pays miners for their valuable work in keeping the blockchain working. The service charge you get while performing transaction in this blockchain is what we call gas fees.

Based on the blockchain or network you are using, the charges differ. My analysis above shows that when sending tokens, sometimes the Tron blockchain is far more cheaper. I hope this article has taught you something new today.

Finally, I want to thank you all for reading through my post today. If you have any questions or contributions, please do well to use the comment section of this post. See you all in my next publication.

Disclaimer: ^{This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your research and consult a financial advisor.}