What Are Ethereum Gas Fees? ETH Fees Explained
Why Trust Cryptonews
The Ethereum blockchain is the largest smart-contract blockchain platform, with ether (ETH) serving as the fuel token for transactions. If you want to send ETH or another ERC-20 token, or if you need to interact with a smart contract, you’ll need ETH to pay for the transaction. In this guide, we explain ETH gas fees to remove the mystery of how gas fees on Ethereum fit into the big picture.
Ethereum gas prices fluctuate throughout the day depending on network traffic. The traffic analogy works well because ETH transaction fees work much like a toll you pay to use a roadway. However, ETH is fuel for several blockchain networks, including Ethereum itself, as well as Arbitrum, Base, and Optimism.
What Is Ethereum Gas?
So, what are gas fees in crypto, and what is the role of Ethereum gas? Gas fees are fees paid to successfully conduct transactions on a blockchain.
For example, if you need to send ETH to another wallet address, you’ll have to pay an ETH transaction fee. ETH works like fuel for the network, which is a large part of why ETH has value. Similarly, if you wanted to interact with a smart contract on the blockchain, you would pay an ETH gas fee for using the contract. Smart contracts are computer programs that run on the blockchain.
Each transaction includes the cost of the transaction itself as well as an ETH transaction fee. For instance, if you needed to send ETH to someone, you’d pay the amount in ETH or any supported token plus the gas fee. In the example below, you’d pay about $0.62 to send tokens to another wallet using the Ethereum network.
At nearly $2,400 as of this writing, ETH itself becomes an unwieldy way to price gas fees. Instead, gas fees are measured in gwei, an abbreviation for gigawei. One gwei equals one billionth of an ETH. A wei, the smallest denomination of ETH, is one billionth of a gwei.
How Do Ethereum Gas Fees Work?
Gas fees on Ethereum reflect the complexity of the transaction but are also affected by demand for the network and the speed at which you need the transaction completed. Think of ETH gas fees as paying for on-demand computing power.
In the next section, we’ll discuss the Ethereum Virtual Machine, which is an operating environment that supports smart contracts on the blockchain. To access these smart contracts, you pay a gas fee based on the complexity of the smart contract operation. When simply sending tokens to another wallet, fees are lower because this causes less demand on the network. However, many decentralized finance (DeFi) protocols can be considerably more expensive to use in terms of gas fees.
- Transaction Complexity: More complex transactions come with higher gas fees because they place higher demands on the network.
- Base Fee: The base fee is the lowest fee available by which you can process a given transaction based on network demand. The ETH base fee fluctuates throughout the day. Typically, ETH gas fees are highest during business hours in the US (9:00 AM to 5:00 PM EST) due to higher network usage.
- Priority Fee: A priority fee works much like tipping a taxi driver to get you to your destination faster. In some cases, you may need to ensure your transaction gets into the next block. A priority fee acts like a VIP pass and can help bypass the other transactions waiting in line.
What Is the Ethereum Virtual Machine (EVM)?
The Ethereum Virtual Machine (EVM) is a decentralized computing environment that supports smart contracts. Rather than running code on a single computer, data from the EVM runs across the entire network, comprised of thousands of full nodes.
How Do You Calculate Ethereum Gas Fees?
Most crypto wallets display the ETH gas fees required for a transaction and provide options depending on how fast you need the transaction completed. The example below shows the option to reserve fees when sending ETH to another wallet address.
The example below shows a much more complex transaction that requires higher gas fees. However, the transaction is on the Arbitrum Layer 2 blockchain which has lower fees and transaction costs compared to Ethereum Mainnet. Arbitrum also supports EVM, so many of the same decentralized applications (dApps) are available.
Several crypto wallets offer the option to display these fees as a dollar value, although you’ll pay the gas fees in ETH. Many also display the current gas price for the network in gwei. However, this number may not accurately represent your cost because transaction complexity also affects the cost. If you need to convert gwei to a dollar value manually, you can divide the current ETH price by one billion.
How to See How Much Gas You Paid
Crypto wallets show the gas costs for a transaction before you sign it. However, you can also find this information on the blockchain. In the example below, we can view the transaction in a blockchain explorer like ArbiScan (Arbitrum Network), as shown below, or Etherscan for Ethereum network transactions.
You can also look up the fees for recent transactions in most wallets. The screenshot below shows the same transaction as the ArbiScan example above, but from within a wallet app.
How to Avoid High Gas Fees
So, how can you reduce transaction costs, and when are ETH gas fees lowest? Generally, gas fees are lowest during off-peak hours. Peak hours typically occur on weekdays during business hours in the US (9:00 AM to 5:00 PM EST).
During peak hours, transactions can become much costlier, particularly on Ethereum Mainnet. However, there are several ways to avoid high gas fees, including using Layer 2 solutions and timing your transactions to avoid peak hours.
Monitor Network Congestion
The Etherscan Gas Tracker provides current gwei prices as well as the average cost for specific actions. You can use this tool to approximate the cost of common actions.
In the heatmap above, the gwei prices fall as low as 2-3 gwei during off-peak hours. However, when the network is more congested, competition to be included in the next block heats up. Gwei prices spike as high as 37 Gwei. This means the cost of a transaction can vary by as much as 1,000% or more, depending on network capacity and demand.
You can also track average ETH gas prices in gwei over a longer period of time using YCharts or similar tools.
Use Layer 2 Solutions
Layer 2 blockchains like Arbitrum and Base support EVM dApps and use Ethereum Mainnet to secure and process transactions. Transaction costs drop dramatically by offloading some of the burden and processing transactions on a secondary chain. Because these chains support EVM, they offer many of the same popular apps found on Ethereum. For example, you can bridge ETH to Arbitrum and transact for a small fraction of the cost compared to Ethereum Mainnet.
Use More Efficient DApps
Transaction complexity affects gas fees, so finding more efficient smart contracts to use can save money. Compare the transaction costs for similar apps to see if one is costlier to use than the other. You can do this with test transactions without signing. Full-featured crypto wallets like MetaMask and Rabby show a price quote before you sign.
Conclusion
ETH gas fees work much like toll roads, granting access to the Ethereum Virtual Machine rather than a roadway. However, unlike most toll roads, the price can vary significantly depending on the amount of traffic. Transacting outside of peak hours helps reduce gas fees. You can also use Layer 2 solutions to reduce the cost of using EVM apps significantly.
FAQs
How much is the gas fee for Ethereum?
Gas fees for Ethereum are measured in gwei, a billionth of an ETH. Depending on the network congestion, simple transactions like sending ETH can cost about $0.60, whereas borrowing or selling an NFT might cost $2 or more.
Why are Ethereum gas fees so high?
Ethereum has become the most popular smart-contract blockchain. The cost of transactions reflects the competition to use the chain as well as the complexity of the transaction.
Who are Ethereum gas fees paid to?
Ethereum base fees are burned, meaning they are sent to an unrecoverable wallet address. The chain maintains a supply by minting new ETH as staking rewards. Priority fees are paid to node operators.
How can I pay less for gas on Ethereum?
Avoid using Ethereum during peak hours of 9:00 AM to 5:00 PM EST on weekdays. You can also use Layer 2 solutions like Abritrum, Optimism, or Base to reduce gas fees significantly.
References
- Arbitrum One (ETH) Blockchain Explorer (arbiscan.io)
- Ethereum (ETH) Blockchain Explorer (etherscan.io)
- Ethereum Gas Tracker and Calculator (cryptonews.com)
Ihssan El Medkouri 
Connor Brooke 
Elena Bozhkova