What is gas fees on Ehtereum and why is so overpriced?
When you make a transaction on the Ethereum blockchain, you will be charged a gas price. The operation of the Ethereum blockchain necessitates a certain level of computational effort, which is provided by cryptocurrency miners. Miners are rewarded with ETH (the Ethereum crypto token) in exchange for their contribution to the Ethereum network's upkeep and security. The gas fee is used to fund the ETH coin rewards. The gas fee is denominated in Gwei, with one Gwei equaling 0.000000001 ETH.
Unlike Bitcoin, the size of an Ethereum block is determined by the amount of gas used per block rather than a data limit. The current block size limit is 30 million gas, while the goal size is 15 million gas per block. However, your transaction is effectively "competing" with others for a spot in the next block transmitted to the network for validation. As a result, your competitor may pay a priority fee (tip) to enhance the likelihood of their transaction being processed ahead of yours, hence increasing the gas fee. Required to "network congestion" on the Ethereum blockchain, this "competition" of transactions due for network validation occurs. When a growing number of transactions use the Ethereum network for validation, network congestion occurs.
DApps are also introducing new features, which makes their functionality more difficult. As a result, a smart contract now has to do more operations than previously. As a result, the already limited ETH blocks become even more crowded as complicated transactions consume more space.
You can use the following suggestions to reduce your gas costs while also speeding up transaction processing.
A) Optimize transaction timing
As different on-chain events occur and as different regions of the world wake up and become active, Ethereum gas prices can swing significantly intraday. As a result, there are times when gas costs are normally lower on average. If you keep track of these times and use them for transactions, you'll be well on your way to decreasing your gas costs. So, when is the optimum time to do business? Because petrol costs are generally higher throughout the week and cheaper on weekends and holidays, batching your transactions on weekends is a simple solution.
B) Use Dapps for minimizing Gas fees
On Ethereum, some decentralized applications expressly offer gas-minimized items. Yearn's V2 Vaults and KeeperDAO, for example, automate and batch users' transactions so that instead of everyone paying gas fees one at a time, everyone pays them all at once, significantly lowering everyone's gas expenses. The Balancer V2 trade protocol is another initiative to examine. Balancer is now one giant vault instead of numerous constituent pools, thanks to the V2 technology, which makes trading through Balancer more cheaper in terms of gas! One of the simplest ways to save money on gas is to use programs that have considerable gas optimizations built into their contracts. All you have to do now is figure out which ones are the most fuel-efficient!
C) Use an app that offers discounts and reduces gas fees
Balancer launched a program earlier this year that partially refunds your gas fees on select pairs with BAL, the project's governance token, to anyone who trades through Balancer. Meaning, if you want to make DeFi trades, consider doing so through Balancer, as you'll get a good chunk of BAL back just for using the protocol! You can also use a DeFi connector Dapp, such as Furucombo, which is currently running a gas reimbursement campaign that awards COMBO tokens to protocol users.
These programs are new, but they have been successful for the respective protocols thus far. wouldn't be surprised if similar programs are adopted by other protocols in the future!
D) Explore Ehtereum layer 2
Due to congestion, transactions on the Ethereum Mainnet (layer one) are expensive. There are layer-two solutions available to assist users in scaling up transactions. On this network, layer-two technologies such as rollups and moving transactions to sidechains are used. As a result, the new process lowers gas costs and speeds up transaction completion. Some layer-two scaling solutions to consider include optimism, arbitrum, and polygon.
E) Use gas tokens
You can earn ETH as refunds when you delete your storage variables on the Ethereum network. It is the foundation of gas tokens. When gas prices are low, you can produce a large number of gas tokens. Redeem your gas tokens for ETH when you need to execute a transaction on the network. Use your rewarded ETH to pay for your gas. GasToken.io is a well-known project that allows you to create gas tokens.
F) Check network for congestion to plan ahead
When there are too many transactions in the pipeline, your task may be put on hold. During this hold period, the agreed-upon gas fee has already increased. When miners begin to execute your transaction, it will fail because you have set a gas limit that is less than the current rate. Worryingly, you'll end up paying a gas fee for an unfinished transaction. As a result, planning ahead of time is essential for saving money on gas and avoiding penalties. Schedule your Ethereum transactions during off-peak hours.
For time-sensitive transactions, keep an eye on the Gas Price by Time of Day chart on Ethereum Gas Charts to see live pricing of gas fees based on the local timezone. To avoid unnecessary fines, estimate the gas fee accurately and set the proper gas limit.
Because of Ethereum's popularity as the most popular platform for DeFi applications, high gas fees might make simple blockchain transactions unaffordable for many users. However, as developers look for new ways to construct and interact with Dapps more efficiently, users will be able to find new ways to save money on petrol.