What is ETH gas and how do fees work in Ethereum?

Just like with Bitcoin, making transactions on the Ethereum network incurs fees that are paid to miners. Also just like with Bitcoin, miners optimize for profitability. This means transactions with higher fees are typically confirmed faster than those with lower fees.

While transactions in Bitcoin - which is a comparatively simple shared digital ledger - are measured in size (bytes), transactions on the Ethereum network - which is a more complex shared 'state machine' (computer) - are measured by computational effort. 'Gas' refers to this computational effort. For example, sending ETH from one address to another (one of the simplest transactions you can make on the Ethereum network), may consume 20,000 units of gas. More complicated transactions require more computational effort and, therefore, consume more gas. If your transaction involves interacting with several smart contracts, for instance, you may consume 100,000 gas units or more.

When you create an Ethereum transaction, you need to indicate the upper limit for the amount of gas you're willing to consume. This is your 'gas limit.' Note that any gas not consumed by the transaction will be returned to your wallet. However, it's also possible to consume gas without a transaction confirming so, if you set your limit too low, you may end up wasting gas (ie. spending ETH without actually getting anything done). This is a notable difference from the Bitcoin network, where your fee can't be taken unless a transaction is actually picked up by miners.

The other factor you need to consider when you create an Ethereum transaction is the 'gas price.' This is the amount of ETH you are willing to pay for each unit of gas consumed. Gas price is measured in giga wei (Gwei), which itself is a denomination of ETH. Each Gwei is equal to 0.000000001 ETH (10-9 ETH) so, instead of saying that your per unit cost of gas is 0.000000001 ETH, you can say it's 1 Gwei.

The cost you pay for a transaction on the Ethereum network, then, is a function of the gas price you set and the gas units your transaction consumes.

Note that gas prices fluctuate based on Ethereum network congestion. When the network is busier, the market rate for gas goes up, making transactions more expensive. For example, when the per unit gas price is 100 Gwei, sending ETH from one address to another may incur a fee of about 0.0024 ETH (the equivalent of approximately $10).

Also note that most Ethereum wallets abstract much of the above complexity away by hiding the "advanced" features. The Bitcoin.com Wallet, for instance, protects users from the risk of wasting ETH by ensuring the gas limit for each transaction is set to an amount that will cover the computational effort needed for that transaction.

Read more: Learn about EIP-1559, Ethereum's transaction fee overhaul.

Customizing fees when sending ETH

The best digital wallets allow you to customize your fees when creating Ethereum transactions. For example, here's how it works in the Bitcoin.com Wallet:

  1. On the "Enter send amount" screen, tap on the "Network fee" icon at the top-left
  2. Choose from one of the three following options:

'Eco' means you'll pay a lower fee, but your transaction will take longer

'Fast' strikes the optimal balance between cost and speed

'Fastest' optimizes for speed over cost

The Bitcoin.com Wallet constantly monitors the market rate for gas to arrive at the optimal gas price for each preset mode, but you also have the option to manually customize your 'gas price' for each transaction. Note that gas prices fluctuate based on Ethereum network congestion, so whether your transaction is picked up by miners sooner rather than later depends on the current market rate for gas. You can check gas rates using a tool like Eth Gas Station and set customized fees based on the market rate for gas. Here's how to set customized fees in the wallet:

  1. On the "Enter send amount" screen, tap on the "Network fee" icon at the bottom-left
  2. Select "Advanced fee options." You'll then be prompted to enter your precise desired gas price for your transaction.

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