A few months ago, I decided to transfer some crypto to another wallet and was shocked by the price of the gas fee. It was nearly equal to the sum I wanted to send. At the same time, I got acquainted with crypto gas fees.
If you are new to the crypto world, this article will help you to understand what they are, why do they vary, and how not to overpay.
What Are Gas Fees in Crypto?
Imagine you cannot send anything without paying to the post office. In the crypto world, you also have to pay some fees when sending your crypto transactions.
Every time you send tokens, swap them on a DEX, or mint an NFT, the network needs to verify and confirm your transaction. The fee that you pay is called the gas fee.
By the way, the fee is paid not to the application itself but to the network participants, such as validators.
Why Do Gas Fees Fluctuate So Much?
This was the thing that puzzled me the most when I was starting out. The exact same action could be extremely cheap one day and extremely expensive the next.
And there’s a very straightforward reason for this: demand. There’s only so much space on a network, and if many people try using it all at once, there’s going to be competition and fees will rise.
Think of it as a toll road during rush hour. Same road, same car, but a dramatically higher price because everyone else wants to drive on it.
There are three main factors determining your fee:
Network congestion: when the network is busy, fees increase.
Transaction type: the simpler the transaction, the cheaper the fee.
Priority: you can choose how big of a tip to add to get faster processing.
Understanding Gas on Ethereum In Layman’s Terms
Since most beginners first encounter the term gas on the Ethereum network, let’s look at an explanation through this lens.
Gas fees on Ethereum are measured in units called gwei. There’s no need to calculate; your wallet automatically provides you with the estimate in dollars prior to confirmation.
Based on personal experience, the most common mistake made by beginners is clicking “confirm” without looking at the figure. Always make sure you’ve checked. If it seems high for what you’re doing, just wait.
It’s always important to have a bit of the native currency of the network in your wallet. Without that, it would be impossible to pay for gas. I once had tokens in a wallet with no gas to pay the transaction fee.
Importance of Gas Fees to Your Finances
The fee may seem insignificant, but it adds up quickly.
For example, if you’re transferring $50 and the gas fee is $5, that means you have lost 10% even without doing anything else. Repeat this a few times and the effect will become more noticeable.
Gas fees affect the rational actions you perform:
Transfers of small value are rarely worth making on a costly platform.
Repeating the transactions often may be detrimental to your balance.
A transaction that is not successful will still incur a gas fee because the system has done its job regardless.
Trust me, this last point surprises almost everybody the first time.
Steps to Cut Down Transaction Fees
Here’s something that may surprise you: you are in control. At least, this works for me:
Confirm after checking the fee on each occasion without fail.
Transact during less congested times; weekends or off-peak times usually cost less.
Leverage cheaper networks; layer 2 solutions and other chains such as BNB Chain typically charge lower fees compared to the Ethereum main network.
Transact in bulk; it’s better to make one big transfer rather than several small transactions.
Wait; there’s no point paying for priority transactions unless you really need them.
One simple question to ask myself every time I’m about to transact: does this network fit this amount of transaction? This practice alone has made a huge difference for me.
A Couple of Words about Choosing a Network
Each network is unique. There are those that are affordable and fast; there are some other advantages. The fees alone aren’t the only thing, but when it comes to transferring small amounts often, they are important.
Research the networks yourself before you transfer any money and always test the process with a small amount first.
Conclusion
Gas fees are nothing more than the price of blockchain usage. The fees increase when the blockchain network becomes busy and decrease when it is not. When you understand this, the surprises stop, and the smart decisions start.
For anyone who starts to work with cryptocurrencies, learning about crypto gas fees is one of the easiest ways to protect their money.
What is your most painful experience with gas fees? Tell me about it in the comments; I would like to know it.