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What I Learned Spending $13 to Transfer $67 Worth of Ethereum

I know Ethereum gas fees are high but come on

Image courtesy of Canva

Please don’t do anything with your Ethereum unless it’s the middle of the night when traffic is low. Or, unless you’re getting enough oxygen to your brain.

Remember when you were young and had to sometimes scrounge for gas money for your car? That may still be the case. But now, you must also deal with gas fees in the digital world (Yay).

If you haven’t been introduced to Ethereum’s gas fees yet, don’t bother. You’re not missing anything. Ethereum needs miners to make the network function. And those miners need a reward for the work they do. That reward is ETH, or as we non-miners know it, gas fees.

Let’s take a closer look at the name of my pain for the day.

If you click this link and subscribe to Medium, I’ll get a bit of cash.

What are Ethereum gas fees?

Ethereum gas fees are the cost of running smart contracts and executing transactions within the Ethereum network. Miners price gas at a variable rate of Ether per gas, which users can pay in any ERC-20 tokens. The smallest denomination of ETH is Gwei. And you can check the current Gwei fee on places like CoinMarketCap.

For example, as of this writing, the average ETH gas fees for transfers are 177 Gwei. If you visit ETH Gas Station, you’ll see transfer fees in USD are $15.43/Transfer. And whether you transfer $10 or $10,000 worth of ETH doesn’t matter. What matters is network congestion. The more traffic, the higher the gas fees.

Ethereum gas fees are a necessary cost to pay for the computations that the Ethereum blockchain needs. For example, suppose you want to write on Ethereum’s blockchain, have a transaction verified, or send tokens from one wallet to another. In that case, you must pay the corresponding fee to the miners who operate the network.

What can make Ethereum gas fees high?

The Ethereum network is a collection of nodes that process and validate transactions. Every node runs the EVM to maintain consensus across the network. The EVM requires gas to do computations and execute smart contracts, so every node requires a small amount of gas to operate.

Gas fees prevent network spam and ensure that all transactions have some cost- even if they don’t do anything! Market forces also set gas prices, and that makes them volatile. If you want your transaction or contract to be processed quickly, you will need to pay more for the transaction fee accordingly.

The following are some examples of the factors that contribute to high Ethereum gas prices:

  1. The Ethereum network’s scalability limitations mean transactions can’t go through fast enough for gas prices to remain low.
  2. New platforms running on Ethereum’s blockchain further congest traffic and raise fees.
  3. Significant market shifts to the upside or downside.

Ethereum is working on several avenues to combat gas fee problems. But they’re all still in progress. And you won’t see a change until the end of 2021.

How can you reduce your Ethereum gas fees?

Ethereum is the second most popular cryptocurrency after Bitcoin. It launched in 2015 with the hope of providing a platform for “smart contracts,” which are automated transactions that don’t need a centralized authority.

Miners set the gas fee on the Ethereum network, and it can vary based on congestion, the mining power of the hardware, and other factors. The cost also goes up during periods of high usage or transaction volume.

The best way to reduce your fees is to avoid sending transactions during periods of high use or traffic volume. Another option is to use this website which will show you the lowest gas price currently on the network for any given day at any given time. You can also wait until more people are not using the network before sending your transaction.

Every transaction’s gas fee is a function of the length of the transaction, the current gas price for ETH, and the number of computational steps required to execute that transaction.

The Ethereum blockchain provides a limited amount of space for transactions. And limited space means if you have a high gas fee, your transactions may take longer to process. To reduce your Ethereum gas fees, you should use a lower gas price by limiting the length of your transactions and leveraging smart contracts.

There are a few steps that you can take to organize your Ethereum transactions efficiently. First, it would be best to group transactions by type. Then, consider using batching transactions, which allows many transaction types to be bundled together in one transaction to save on the gas fee.

Will Ethereum 2.0 reduce gas fees?

Ethereum 2.0 is a plan to improve the security and scalability of Ethereum. As a result, it should reduce gas fees for Ethereum transactions by a vast amount (some anticipate 97%).

Cheaper fees can make it much more affordable for ordinary people to use the Ethereum network rather than using another blockchain-based service like Ripple or Stellar.

The goal of Ethereum was always to provide a platform for decentralized applications (dApps) and smart contracts that did not rely on any centralized entity for validation or execution. If Ethereum can meet this goal, then you should see gas fees go down significantly in the future.

What are alternatives to Ethereum for developing dApps?

Alternatives to Ethereum include EOS, Cardano, and Solana. The major difference between the two is that these alternatives are faster and more scalable than Ethereum. Here they are in brief.

Solana (SOL)

Solana is a newer blockchain with three main features: efficient consensus mechanisms, efficient sharding mechanisms, and light client verification processes. The consensus mechanism of Solana allows for transactions to occur very quickly without depending on miners or mining equipment for confirmation — making it much more scalable than other blockchains like Bitcoin or Ethereum.

Cardano (ADA)

The ADA cryptocurrency is superior to the ETH cryptocurrency in many ways. It is more scalable, has faster block times, and lower fees. It also offers proof of stake consensus algorithm. Some of the particular advantages ADA has over ETH are,

  1. The Hydra protocol is a vital part of Cardano’s future. It is designed to be the first blockchain to use an interdisciplinary approach to building more robust systems. Developers can utilize the protocol’s infrastructure for creating more chains off the main chain. And subsequently, more chains off of each of those chains.
  2. The Hard Fork Combinator is a new functional construct that allows Cardano to experience a hard fork without disrupting the network. And it’s useful for future projects that might require divergence. It’s also easy to extend with any other function or transformation.
  3. Complete decentralization is the cornerstone of its final phase: Voltaire.

EOS (EOS)

The EOS blockchain is a decentralized operating system built to handle the scalability issues of other networks. It can scale to millions of transactions per second (on paper). Its actual TPS is ~2800. A constitution governs the network and maintains itself without any central authorities.

Conclusion

Don’t do anything with Ethereum unless you have to or traffic is late. At least until ETH 2.0 hits the market.

Ethereum is a great network and brought faster processing and smart contract innovation to the crypto space. However, over time its fees for doing business have skyrocketed. And until ETH 2.0 hits, you and I must contend with high gas fees.

Don’t be like me. Instead, wait for the best time to move your ETH. You can use tools like ETH Gas Station to help you decide the best time to make transfers.

Stay strong.

If you click this link and subscribe to Medium, I’ll get a bit of cash.

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