Ethereum gas fee explained

Ethereum gas fee

The gas fee you pay for XEN your transactions on the Ethereum blockchain is like a gas you need to expend to drive your car on the roads. It’s a fee paid to Ethereum blockchain miners for the computing power they expend to verify blockchain transactions. Every action you take on the network incurs a cost, and sometimes it’s very high if you transact during peak hours, but there are ways to lower it. It all depends on your knowledge of what a gas fee is, why it is high, and what solutions exist to mitigate the cost. Learn about gas to know how to mint your XEN tokens effectively.

what is ethereum gas fee

The gas fee is automatically calculated for you and is determined by factors such as network traffic, the size of the data in your transaction, and the number of internal calculations that must be performed. You can decide to accept the proposed fee or set your own one. A lower fee will make your transaction confirmation slower, and a higher fee will make it faster. It often happens that during high traffic, many users compete for the same spot in the next block, and only transactions with the highest gas have priority. This leads to users raising their gas prices further, resulting in gas prices skyrocketing. It isn’t uncommon to see people pay 900 USD for a gas fee.

Ethereum gas price
Ethereum gas price

how to calculate gas fee

Gas is counted in gwei, where 1 gwei = 0.000000001 ETH. For example, a gas fee of 30 gwei =  0.000000030 ETH.

The gas fee is calculated according to the following formula:

Total Gas Fee = Gas units (limit) x (Base fee + Tip)


  • Gas limit.

When paying for a transaction, you’ll be presented with an automatically calculated gas fee, but you can edit how much you want to pay by setting your own gas limit. The gas limit is the most you’re willing to pay to have your transaction included in the blockchain. It is usually set at 21,000 units. Even if you set a high gas limit, Ethereum will process your transaction using what’s needed and no more, and the difference is refunded to your wallet. On the other hand, your transaction may fail and you may lose your gas if your gas limit was set too low. 

  • Base fee.

This fee is dependent on network congestion and is burned as part of a deflationary mechanism built into the system. It is the minimum amount of gas you need to expend to see your transaction included on Ethereum. This fee is dynamically adjusted depending on the traffic.

  • Tip.

Ethereum miners include transactions with tips first because they’re driven by profits. The higher the tip you set, the faster the speed of transaction inclusion on Ethereum you’ll get.

As an example of the total gas fee formula, suppose I want to send you 1 ETH and the average amount of gas required to transfer ETH on the Ethereum network is 21,000 units. That would be my gas limit. The minimum amount of gas required to send the transaction at the time (base fee) is 120 gwei. I want to speed up the transaction, so I add a 20 gwei tip.

In this case, the total cost of sending you 1 ETH is 21,000 * (120 gwei + 20 gwei).

The total gas fee would be 2,940,000 gwei, or 0.00294 ETH (approximately $5.18, at press time).

Why are ethereum gas prices so high

The main reasons that Ethereum gas fees have a high cost are:

  • Gas prices are counted in gwei, which is a denomination of ETH. This means that if the price of ETH is high, gwei is also high and you spend more for the gas fees.
  • Gas prices depend on the demand for block space on the Ethereum blockchain. If a large number of users want to include their transactions on the blockchain, this indicates that there is a high demand for block space, and prices rise as the base fee rises.
  • The users are competing with each other, and they set gas limits higher to see their transactions included.
  • Tipping the miners to fast-forward your place in the queue raises your cost of the gas fee per transaction.
Gas fee peak
High gas fee prices

how to save on the ethereum gas fee

  • Set a max gas fee limit

You can set a maximum gas fee limit and indicate how much you’re willing to pay for the transaction. The miners will refund the difference once your transaction is included. Be aware, though, to not set the maximum fee limit below what it actually costs because your transaction will fail and that fee will be lost.

  • Use layer 2 scaling solutions.

The Layer 2 scaling solutions like zkSync, Arbitrum, Loopring, or dYdX offload the traffic from Ethereum to their own networks where they process transactions, verify them, and record them back on Ethereum.

Gas price during the week
  • Transact when the traffic is low.

Saving on gas fees means that you need to be patient and transact when the network is least congested. It’s the same with road traffic. If you go out during the peak hours of road traffic, you’ll get stuck in the traffic and expend lots of gas. It’s better to transact during the weekend or during the hours of least movement on the Ethereum network.