Why are the Ethereum commissions so expensive and how to reduce them?
Transaction fees in Ethereum are determined by blockchain load and transaction complexity. Ethereum has a large number of users but poor performance, resulting in increased load and consistently high fees. What should you do about it? Can we really cut the commissions? Let’s find out together!
Activating The Merge has not changed as a result of the Merge update.
Ethereum fees are calculated based on the transaction’s gas limit and the cost of gas at the time.
There are several primary methods for lowering Ethereum fees. Using the network during low-load periods, transaction simulation or aggregation, and other options are among them. Second-tier solutions and sidechains are popular methods for lowering Ethereum asset transaction fees.
What is gas in Ethereum?
The term “gas” in Ethereum refers to the amount of computing resources required to perform an operation. Transferring a token or creating a new asset, deploying or interacting with a smart contract all necessitate the use of virtual machine resources. Their volume is expressed in “gas.”
The price of gas is specified in Gwei, which is the designation of a small portion of the Ethereum coin equal to 0.00000001 ETH.
The amount of computing resources required for a transaction is not fixed and is determined by the workload of the Ethereum blockchain as well as the complexity of the chosen transaction.
This is why there is a phenomenon known as the gas limit. This is the amount of computing resources required to complete a transaction, whether it is an asset exchange in the DeFi protocol or a USDT ERC-20 transfer between addresses. The gas limit is the number of liters of gasoline required to travel from point A to point B.
The cost of a transaction is calculated by multiplying the required gas limit by its value in Gwei. If your transaction requires 21,000 units of gas and the market price per unit of gas is 14 Gwei, the transaction fee is 0.000294 ETH.
Following the London hardfork in August 2021, the Ethereum network changed its commission structure. It included a mechanism for burning ETH as well as a block size limit that varies depending on the blockchain’s load. The Ethereum Foundation website has a detailed commission calculation scheme.
Ethereum remains the most popular blockchain protocol, with hundreds of the most popular applications running on it. At the same time, Ethereum’s performance hasn’t changed much since its launch in 2015, and it’s far behind more modern projects like Polkadot, Solana, and Algorand. This is why Ethereum commissions are consistently high. At the same time, smart contract transactions have higher costs.
How have commissions changed after the Merge?
The mechanisms for determining transaction fees on the Ethereum network have remained unchanged since the switch to the Proof-of-Stake consensus algorithm. The only indirect effect on Ethereum transaction fees may be the shorter time between blocks. Before The Merge, blocks were created at 14–15 second intervals; after the merge, the time was reduced to 12 seconds. The Ethereum blockchain has become about 20% faster, which can, though not significantly, reduce the load on the network.
The first post following The Merge upgrade, aimed at lowering fees by changing settlement mechanisms at the underlying blockchain level, is scheduled for the second half of 2023 as part of the Shanghai hardforge.
Further upgrades will involve the implementation of sharding and increased use of rollups. According to Vitalik Buterin, this could increase network throughput to 100,000 per second, while reducing transaction fees on the Ethereum network.
The L2 solutions
Despite the fact that Ethereum’s commissions remain high, and the issue is not expected to be resolved anytime soon, there are already ways to pay less for transfers. There are numerous Layer 2 protocols for Ethereum that are intended to address the issue of high commissions.
Layer 2 Ethereum solutions are based on “Rollups” technology, and transactions take place outside of the main Ethereum network. They are aggregated into large groups before being confirmed at the “basic” level, i.e. in the Ethereum blockchain.
Popular L2 projects include Arbitrum, Optimism, Loopring, ZKSync, Boba Network, and Aztec Network.
Ethereum sidechains use independent security and consensus algorithms and are essentially networks separate from Ethereum. Sidechains, like Layer 2 solutions, aim to increase transaction speed while decreasing transaction costs for the “parent” network’s crypto-assets. The most popular Ethereum sidechains are Matic (Polygon PoS), Gnosis Chain, and Loom Network.
Other ways to reduce comissions
- Choose the moment of least network congestion. Ethereumprice service shows such statistics. According to its data, the minimum for the transfer will now have to be paid on Monday, in the morning.
- When sending a transfer, you can manually set the fee in some crypto wallets (for example, MyEtherWallet and Metamask). However, do not pay less than the minimum recommended amount, or the transfer may not be executed.
- Transaction simulation. Before you send a transaction, estimate its real value by using help services like Tenderly, DeFI Saver, which simulate your transactions.
- Consider using other blockchains that provide cheaper transactions and faster transfer rates. EVM-compatible networks with ecosystems similar to Ethereum include BNB Chain, Matic (Polygon PoS), and Fantom. There are also Ethereum-independent projects like Solana, Cardano, and Near.
- Use special applications such as Balancer, which can aggregate multiple users’ transactions, resulting in lower fees for each of them. Some DeFi projects provide discounts and other benefits for transactions involving assets from the Ethereum ecosystem.
Have you tried one of these ways? Tell us!
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