What are Ethereum gas fees and how do they work?


Let’s take a look at what gas fees are and how they work in the Ethereum blockchain ecosystem.

Gas rates in the Ethereum world

There has always been a lot of discussion about the complicated and above all quite expensive mechanism of fees that Ethereum charges to carry out any type of transaction on its blockchain, the calls gas rates.

Gas refers very briefly to the fee or cost of each transaction that is required in the native cryptocurrency of Ethereum, ETH.

The term indicates the propellant that allows the Ethereum “machine” to move. The price is established by dividing 1 Ether into small fractions, which are called gwei. (each gwei equals 0.000000001 ETH).

Thanks to the gas or fees that are paid, it is possible to virtually initiate the smart contracts that are the basis of every transaction on the blockchain.

The price paid for each transaction is continually changing, depending on current traffic or decisions made by miners, who may also possibly reject a transaction if your “cost” is not considered adequate.

This is precisely the incentive paid to miners who monitor the security of the network, reviewing and verifying every transaction. The miners thus have a second resource that compensates them for their work in addition to the ETH they are paid for their “mining” activity.

Users have to pay this fee to reward the work of the network and the energy consumption that the blockchain requires to function. Since the price of ETH gas moves in the logic of supply and demand, the more transactions users request, the higher the gas fees will be, because Ethereum block space is getting scarcer.

The value of the gas fee miners request depends on the size of the transaction they want to record on the blockchain

Ethereum Protocol Updates

With the London Upgradeheld in August 2021, the twelfth held by Ethereum since its founding in 2015, the gas fee calculation method was changed.

was introduced the implementation of the EIP1559 proposalwhich precisely changes the handling of transactional fees making them more predictable and, more importantly, cheaper.

In short, as the base transaction fee is burned, users now also need to set some kind of tip on your transactions. Tipping compensates miners for executing and propagating user transactions in blocks and should be set automatically by most wallets.

The total transaction fee is then calculated with this simple math: gas units (limit) * (base fee + tip).

Where he limit is the minimum amount that a user is willing to pay for a single transaction, the base rate is the minimum amount required by the network to carry out the transaction and the tip it is the additional amount you choose to give to miners to prioritize your transactions. about others

In the last period, with the explosion of DeFi Y NFT and with the price of ETH on the rise, the fees being paid have also increased significantly and this has resulted in a small escape by dApp developers (currently around 3000 on the blockchain) to newer and cheaper blockchains like Cardano, Solarium, polygonal Y avalanche.

This is why in the last year the Ethereum developers have been working hard on the latest update, mergewhich should change the PoW consensus algorithm to the current one Proof of Stake more economical, sustainable and scalable.

By some calculations, this update could reduce grid power consumption by up to 99%making fares much cheaper and more convenient as a result.

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