What is Crypto Gas?
May 23, 2022
Read Time 5 MIN
A crypto topic that continues to come up more and more is the cost of gas and why it’s so high.
Crypto gas refers to the cost required to perform a transaction on the Ethereum network. Ethereum miners, whose equipment and power support the network, will set a price to perform computations based on supply and demand. When the demand is high, miners can ask for more in gas fees. When demand is low, gas prices usually fall. The fees are paid in Ethereum’s native currency, but are also denominated in GWEI.1 A GWEI is equal to .000000001 ETH.2
How is Crypto Gas Used?
Consider the following example: you’ve researched a new crypto currency that sounds interesting, for this instance we’ll use a lesser known alternative coin called Sylo. (This is merely an example, not a recommendation to buy or sell). You visit Coinbase only to realize that Coinbase doesn’t currently support Sylo. They advise you to use Coinbase Wallet. Instead, you purchase some Ethereum on Coinbase and send to your already downloaded MetaMask wallet. That requires gas. Then you click on “swap”. To complete the exchange, this requires more gas.
Swap from ETH to Sylo
Source: MetaMask Wallet.
In the future, should you want to exchange out of Sylo and into another cryptocurrency, this requires more gas. In short, a gas fee is applied when sending cryptocurrency from one wallet to another and the same is true for sending NFTs. If you aren’t familiar with NFT purchases, I suggest reading my earlier blog to learn more about buying NFTs. Occasionally, you will also pay a gas fee in order to connect your wallet to other dApps, or decentralized applications, such as an exchange mentioned above.
These instances are not unlike other real-world transactions. For example, your credit card company likely charges the vender a small fee when completing a transaction or if you were to send cash to a family member using a common payment service, there would most likely be a fee involved for that transaction as well. Just recently, I donated to my daughters’ school, and the school charged me their own version of gas, a $5 credit card convenience fee. In general, gas fees may seem high when you are sending small amounts of crypto, but for larger sums of money, on a percentage basis, it’s still relatively inexpensive.
It is possible to waste gas, too. Sometimes transactions will fail due to timing out, but ultimately, it happens because someone wasn’t willing to pay a high enough gas fee to complete the transaction. An example of this would be trying to purchase a new, limited edition NFT along with many others at the same time (i.e. minting). Demand is high and so only those participants willing to pay the highest gas fees will likely be successful in completing the transaction. Those whose transactions failed actually lose a small amount of gas.
It is possible to think about gas the same way you think of gas for a vehicle. In the U.S., it would be similar to driving your car to a November Black Friday sale where all of the cheap flat screen TVs have already sold out. So, you turn back around, having wasted gas and a potentially the opportunity to complete your intended goal.
How to Minimize Crypto Gas Fees
Wait until demand is low. You’ll often get the best prices to complete your transactions when fewer people are engaging with the network. The best “current” rule of thumb is to simply wait until folks in the U.S. go to sleep. On the east coast, I find that early morning is typically best.
If you want to be more precise, then visit this Block Native gas estimator site. This helpful tool will show you current gas prices against your probability for success. For example, if you are in a situation where you are trying to mint an NFT that has a limited quantity of 100 and there are thousands of people also interested, Block Native provides guidelines for how to adjust your gas to make sure that you are competitive, and it may help your chances of preventing transaction failure.
Using MetaMask, seen below, you can edit the priority of your transaction by customizing the Max Priority Fee or the “Miner Tip” and the Max Fee, which is the most you will pay.
Max Priority Fee for Crypto Gas
Source: Block Native Gas Estimator.
Additional 2.0 and 3.0 strategies that I recommend for fellow MetaMask wallet users include:
Adjust “Custom Nonce” Settings
Nonce is the order of priority of your transactions. Should you encounter a scenario where you fully believe a transaction will fail and cost you a heavy amount in gas, you may consider quickly sending a new transaction with a lower nonce that includes all of your Ethereum to another wallet. This is for emergencies only, but it’s a savvy way of avoiding a hefty fee when the transaction fails. Having knowledge of this strategy could save you thousands down the road.
Add Flashbots RPC to Your MetaMask
Using the Flashbots network enables your transactions to remain private unless the transaction is completed. Since your transaction request is initially private, if it does fail, then you cannot be charged any gas fees. Learn more about how to add Flashbots to protect your MetaMask wallet.
1 Investopedia: Gwei is a portmanteau (a blend of words) of giga and wei. Gwei is a denomination of the cryptocurrency ether (ETH), the digital coin used on the Ethereum network.
The author of the blog owns SYLO, mentioned within the blog.
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