Gas fees are frequently discussed while talking about cryptocurrencies, NFTs, and Decentralized finance (DeFi). An important phase in the transaction of cryptocurrencies, minting NFTs, and in DeFi operations is the payment of the gas fee. Let’s learn more about how it affects blockchain transactions.
What Are Gas Fees? Why Do I Need to Pay Them?
Gas fees refer to the transactional costs paid to the miners on a blockchain protocol to feature a user’s transaction. This fee serves as an incentive for miners to keep operating on the blockchain. The gas fee does not remain constant and varies substantially due to numerous factors.
The ETH gas price mechanism operates according to typical supply and demand market dynamics. If there is a higher demand for transactions, miners usually prefer ones that pay more. It encourages users like us to pay more fees to execute our transactions quickly and efficiently.
How Can One Optimize Gas Fees?
As a user, one technique to optimize ether gas price is to execute operations and contracts at stipulated intervals of the day when the network witnesses less congestion. It implies that the cost of implementing a contract varies depending on the time of the day when it is carried out.
There is also another developer-oriented solution that is beyond the capabilities of the average user. It entails decreasing the amount and complication of all blockchain transactions to achieve optimization.
What Are Some Leading Cheap Gas Fees Blockchains and L2 Solutions?
Today, several robust Layer-2 solutions have emerged to provide users with an answer to the high gas fees and slow transaction time issues faced by the Ethereum blockchain.
The Layer-2 rollup scaling solutions are deployed in the Ethereum blockchain, delegating transaction processing externally to the main blockchain while retaining specific data per transaction on-chain. Transactions can use the same security architecture as the Ethereum Mainnet while being handled in a discrete layer, reducing network congestion. As a result, users get to pay a cheap gas price and experience speedier validation times.
Apart from the L2 solutions, some of the top cheap gas fees L1 blockchains include-
- Solana — scalable decentralized blockchain
- Avalanche — Fast, low-cost decentralized blockchain
- Cosmos — The internet of blockchains
- Tron- a decentralized, open-source blockchain-based operating system with smart contract functionality and proof-of-stake principles.
How to Calculate Gas Fees?
Let’s consider the case of gas on Ethereum. To perform transactions on the Ethereum blockchain, gas is required. We need to pay for any computation performed on the blockchain while moving or exchanging tokens, engaging with a contract, transferring ETH, or for other types of transactions. All such payments are made in gas, which is always paid in terms of Ethereum.
In accordance with EIP-1559, a transaction creator’s overall charge is calculated using the formula- ((base fee + priority fee) x units of gas utilized).
For instance, consider user A who has to pay user B an amount of 1 ETH. The transaction has a 21,000 unit gas limit and a 100 gwei base fee. With a priority fee of 10 gwei, the calculations come as 21,000 * (100 + 10) = 2,310,000 gwei, or 0.00231 ETH, using the formula above.
User A’s account will be debited by 1.00231 ETH when the money is sent. 1.0000 ETH will be credited to user B. The miner is paid 0.00021 ETH as a tip. What is burned is the base fee of 0.0021 ETH.
Conclusion
Now that we have touched on the fundamentals of gas fees and their implications, users must remember that since we get charged for utilizing the computation power on the platform, we must pay the gas fees irrespective of the success or failure of the transaction.
Several accurate gas fee tracker tools are available online to help us calculate the amount of ETH to be paid for smart contract transactions on the Ethereum blockchain, Shunya will provide you with accurate gas fees paid by the wallet across multiple blockchains.
About Shunya
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