January 16, 2025
4 min read

What Are Gas Fees in Crypto and Blockchain?

By
Pat
Ka. Expert

What is Gas in Cryptocurrency?

If you’re new to crypto, you’re probably here because you’ve come across the term “gas” when exploring blockchain networks. Gas is an essential concept in crypto, especially for those dealing with transactions or interacting with smart contracts. To flesh this out, let’s discuss what is gas in cryptocurrency, how it works, why it exists, and how you can save on gas fees when making transactions using an exchange or crypto app.

Understanding Gas: The Definition and How It Works

In the crypto realm, “gas” refers to the fee or pricing mechanism required to conduct transactions or execute smart contracts on a blockchain network. However, it’s more than just a fee; it’s a foundational part of blockchain technology.

Every transaction on networks like Ethereum requires computational power, and gas represents the cost of using that power. Gas ensures that network participants, particularly miners or validators, are incentivized to process and validate transactions. It also helps regulate the network’s activity, preventing it from being overwhelmed by spam or excessive demand.

Here are some examples of how gas fees are used:

  • Smart Contracts: Deploying and interacting with smart contracts on Ethereum requires gas. The complexity of the contract determines the amount of gas needed.
  • DeFi Activities: Many decentralized finance platforms require gas for activities like staking, swapping tokens, or providing liquidity.
  • NFT Transactions: Minting, buying, or transferring non-fungible tokens (NFTs) on platforms like OpenSea involves paying gas fees.
  • Regular Transactions: Sending cryptocurrency from one wallet to another also incurs gas fees, though these are generally lower compared to other activities.

Why Does Gas Fees Exist?

Gas fees exist for several reasons:

1.   Fair Compensation

Validators or miners who process transactions need to be compensated for the computational power they provide. Gas fees ensure they’re paid fairly for their work.

2.   Network Security

By requiring users to pay for transactions, gas discourages malicious users from spamming the network with frivolous or harmful requests.

3.   Efficient Resource Allocation

Gas creates a prioritization mechanism, as users can pay higher fees to have their transactions processed faster. This is especially important during periods of high network congestion.

What Factors Influence Gas Fees?

Several factors can affect gas fees on any blockchain network:

1.   Network Congestion: When a network is busy, more users are competing to get their transactions processed, which may drive up gas prices.

2.   Transaction Complexity: More complex transactions, such as executing smart contracts, require more computational resources, which may also require higher gas fees.

3.   Supply and Demand Dynamics: Gas prices fluctuate based on the overall demand for network resources.

4.   Blockchain Design: Each blockchain has its own method of calculating fees. For instance, Ethereum uses a dynamic fee structure introduced with the EIP-1559 upgrade, while Solana’s fees are inherently low due to its scalability.

How Does Gas Work on Ethereum?

On the Ethereum network, gas is measured in units, and the cost of gas depends on two main factors:

1.   Gas Limit

This is the maximum amount of gas a user is willing to spend on a transaction. For instance, simple transactions like sending ETH require less gas, while more complex operations, like deploying a smart contract, require more.

2.   Gas Price

Gas price is the amount a user is willing to pay per unit of gas, typically measured in Gwei (1 Gwei = 0.000000001 ETH). Users can adjust the gas price to influence how quickly their transaction is processed.

For example, during times of high demand on the Ethereum network, gas prices tend to rise as users compete to have their transactions prioritized. On the flip side, during quieter periods, gas prices are generally lower.

To get a detailed look at how transaction times can vary based on factors like gas fees, check out the how long does ETH transaction take article.

Gas on Other Blockchain Networks

While Ethereum is the most well-known network utilizing gas, other blockchains have similar mechanisms, albeit with variations.

For instance, Solana’s gas fees are significantly lower compared to Ethereum due to its high throughput and unique consensus mechanism. This makes it a popular choice for users looking for cost-efficient transactions.

On the other hand, Binance Smart Chain (BSC) also offers lower gas fees compared to Ethereum, making it attractive for developers and users in decentralized finance (DeFi).

To understand how Solana compares to Ethereum in terms of gas fees, scalability, and use cases, check out our guide on SOL vs ETH.

How to Save on Gas Fees: A Few Tips

Gas fees can be frustrating, especially during peak times. Here are some tips that may help you minimize costs:

1.   Choose the Right Timing: Transaction fees tend to be lower during off-peak hours. Experiment with different times to find cheaper rates.

2.   Use a Gas Tracker: Tools like Etherscan’s Gas Tracker provide real-time information on gas prices, helping you determine the best time to transact.

3.   Optimize Transactions: Batch multiple actions into a single transaction where possible, or use Layer 2 solutions to reduce fees.

4.   Explore Alternative Blockchains: If high fees on Ethereum are an issue, consider using more cost-effective networks like Solana or Binance Smart Chain.

The Bottom Line

Gas is an integral part of the blockchain ecosystem, ensuring that networks remain secure, functional, and efficient. Understanding how gas works and how to manage fees can help you make the most of your cryptocurrency journey.

Whether you’re navigating high gas fees on Ethereum or exploring more cost-effective blockchain networks, tools like Ka.app’s how-to articles or even the platform itself can help you manage your crypto easier and more accessible. Ka.app also has features that simplify daily crypto transactions, such as buying cryptocurrency, crypto-to-euro conversions, and transferring funds with IBAN.

FAQs

Which crypto has the best gas fees?

When it comes to low gas fees, cryptocurrencies like SOL and Cardano (ADA) stand out. Solana is known for its fast transaction speeds and minimal fees, often costing less than a fraction of a cent per transaction. Similarly, Cardano’s efficient blockchain design ensures low fees while maintaining security and decentralization.

Other networks, such as BSC and Polygos, also offer affordable gas fees, making them popular for transactions and decentralized applications.

How to avoid gas fees on crypto?

While you can’t entirely avoid gas fees, you can minimize them with a few smart strategies. These include but are not limited to opting for blockchains with lower fees, transacting during off-peak hours when the network is less congested, or using crypto wallets that offer promos that lower service fees.

Do gas fees differ between sending and receiving crypto?

Gas fees are typically paid by the sender of a transaction, not the recipient. For example, if you’re sending ETH to a friend, you’ll pay the gas fee, while your friend receives the exact amount sent. However, if you’re interacting with a smart contract (e.g., swapping tokens on a decentralized exchange), you might encounter additional fees for the contract execution.

If you want a cost-effective option, Ka.app allows you to send and receive crypto for free when transacting with other Ka.app users.

Are gas fees the same across all wallets?

Gas fees are determined by the blockchain network, not the wallet, but wallets may calculate and recommend gas fees differently. For instance, some wallets automatically adjust gas fees based on network conditions, while others allow users to manually set the fee. It’s always a good idea to use a wallet that provides clear guidance on optimal gas fees.