Crypto investors are often heard complaining about the cost of gas for minting digital artworks into NFTs. They may also compare gas fees, or talk about waiting for gas prices to go down.
What is gas in the crypto world, and why is it so important for getting things done? Keep reading to find out more about this crypto slang term!
What Is Gas?
Gas is a transaction fee. This fee is paid to a blockchain network’s “miners” as compensation for the energy that they spend on computing as validator nodes. This computational effort is needed to process and confirm cryptocurrency transactions.
Gas is typically priced in fractions of ether (ETH), the native cryptocurrency of the Ethereum network. These fractions are also known as “nanoeth” or “gwei”. By paying these fractions, decentralized applications are securely allowed to self-execute.
Gas fees are what keep crypto transactions secure. Attaching these costs to processing digital assets prevents accidental loop transactions and spamming.
How Are Gas Fees Computed?
There are several factors that you need to take into consideration when computing the price of gas. Here’s a quick explanation of each.
- Number of people on the blockchain: The more users trying to process transactions, the higher the demand for computing power. This drives up the price of gas you’ll need to get miners to accept your transaction.
- Speed for processing transactions: When checking gas prices on sites like CoinGecko, you’ll notice that prices are often sorted by speed: fast, standard, or slow. The faster you want a transaction to be processed, the higher your gas fee will be.
- Price of digital assets: Gas prices are higher for more valuable digital assets. The higher the value of the object of your transaction, the more expensive your gas fee will be.
- Complexity of transaction: Simpler transactions like moving ETH between two addresses will require very little gas. More complex transactions involving smart contracts will need more gas. Examples of these are buying ERC-20 tokens or staking tokens.
Why Are Gas Fees So High?
Gas prices change often, but they typically shoot up when there’s high demand for processing on peer networks. An example is when a new NFT project is undergoing minting. With the sheer number of non-fungible tokens that need to be minted and sold, there are more cryptocurrency exchange transactions.
Gas prices are heavily affected by supply and demand between network users and miners. Users can push for immediate processing or wait for better prices. Miners can refuse to process transactions if gas prices don’t meet their set price threshold.
Ethereum is still the most popular network for building crypto assets, but it’s widely believed that the upcoming Ethereum 2.0 update will result in lower gas fees. Other users have turned to alternative networks like Avalanche, Binance Smart Chain, and Solana for lower gas fees for transactions.
How Can I Save Money On Gas Fees?
If you’re trying to process crypto transactions at the lowest price possible, here are some ways to save on gas.
Choose A Less Expensive Network
Gas fees are dependent on the blockchain you choose for your crypto transactions. For example, Solana is emerging as a popular alternative to Ethereum. This is because Solana claims its system expends less energy for decentralized exchange, resulting in lower gas fees.
Polygon is another popular choice in the blockchain space because of its batch processing system. Because multiple transactions are verified and processed in one go, users save time and money on the Polygon blockchain.
Keep in mind that these gas fees differences fluctuate all the time, so it’s best to do a side-by-side comparison. Ethereum gas fees have traditionally been the highest, but they’ve gone as low as 10 gwei in 2022 despite the high demand for transactions.
Pick The Right Time
Gas is always pricier when the validator nodes have a lot of transactions to process. Pick times with lower trading volumes, especially when you’re just moving tokens between your crypto wallets. Weekends are typically low-traffic days for Binance Chain, Bitcoin, and Ethereum networks, resulting in lower fees.
Set A Limit To Spare Your Crypto Wallet
Users can set their own gas fee limits that only push for the transaction to be performed when fees hit the lowered price. This is ideal for those who have limited crypto assets although not for time-sensitive transactions like rush crypto token sales.
Gas fees are a reward for miners’ computational effort. Without their work, blockchain networks would never be able to validate and process transactions. That’s why it’s important to pay these fees as incentives to them.
However, there are always ways for users to save on gas if they’re not in a hurry. Pick blockchains with lower fees, transact during slow days, or simply set a limit. These small actions will allow you to process your transactions successfully at the lowest price.