What are gas fees? A beginner’s guide to understanding blockchain

The world of blockchain is vast and, at first glance, some may feel that it is complex. But this modern world is also the most revolutionary technology being adopted throughout the world due to its ability to bring about a radical change in our world.
For this reason, we must understand everything about this world so that we can deal with it correctly.
That is why today we will talk about gas fees on the network. What are those fees? Why should it be paid? Is there a way to reduce it?

What are gas fees?

Gas fees are fees paid on the blockchain network to carry out various operations. These fees may vary from one network to another, but the principle is the same.

It is known that the Blockchain network is decentralized, and therefore the miners are the ones who secure this network.
This is done by providing the network with powerful computing power. The greater the number of devices connected to the network, the greater the decentralization, the lower the fees, and the faster the completion of various operations.

It’s almost no different between a proof-of-work and a proof-of-stake mechanism. Network fees for Proof of Stake are usually slightly lower. This is because the devices responsible for securing the network are faster, more efficient, and easier to operate and complete operations.
Therefore, this means that fees in a blockchain based on a proof-of-work mechanism are higher than in a blockchain-based on a proof-of-stake mechanism.

But this situation has one exception, which is the Ethereum network, the most famous network in the cryptocurrency market. This network was based on the proof-of-work mechanism and was transformed into a proof-of-stake mechanism, but the fees for it are still the highest.
This is due to the intense pressure on the network, as it has the largest ecosystem in the world of cryptocurrencies. Also, soon the network will be subjected to an update known as sharding that will help reduce fees significantly. We will undoubtedly inform you of this update as soon as it occurs!

The importance of gas fees on blockchain

If you want to know the importance of gas fees, you simply must understand the nature of the human psyche. The human soul always loves making money.
Blockchain is also fast, secure, and transparent. Therefore, financial transactions can be completed with ease.

However, due to the decentralized nature of Blockchain, there must be computers that provide the necessary power to operate this network.
But it is not acceptable for these computers to work for free! These computers draw a lot of energy, and therefore the owners of these computers must receive some income for the matter to become profitable and sustainable as well.

That’s why gas fees exist. Whenever a transaction is completed on the blockchain, gas fees are paid and can be considered as network operating fees and energy consumption.

But there is also another reason these fees exist. These fees help secure the network against fraudulent attacks.
This is because the fraudster will have to pay a fee to carry out his transaction. This process will also be reviewed and recorded, and thus these fees will encourage many fraudsters to use the blockchain to commit crimes, contrary to the expectations of many.

Why are gas fees always high on Ethereum?

Any experienced blockchain trader or investor is aware that the Ethereum network always has high fees.
Fees on the Ethereum network are measured in what is known as the Gwei, which is a small unit of measurement in the Ethereum currency that is considered the same as the cent to the dollar.
In a bear market, when there is no pressure on the grid, gas fees are approximately $1 to $5. During peak times, fees sometimes reach $500 per transaction.

The Ethereum network is primarily designed to provide protection and security against external attacks. That’s why their fees are always higher than other networks.
There is always a dilemma in Blockchain, which is that it is not possible to achieve compatibility between decentralization, security, privacy, and speed.
One of the three is always sacrificed. The Ethereum network sacrifices speed and scalability at the expense of other aspects. This is in contrast to other networks, which are much faster than Ethereum.

Because Ethereum has the largest cryptocurrency ecosystem in the crypto market, it is natural that network fees are always high.
This is due to the intense pressure and high demand on the network at all hours of the day. But usually at dawn, Tunisia time, the fees are rather low.

Ethereum eco landscape
Source: Coin98.

What are these fees used for?

Every operation that takes place on the network requires gas fees, but these fees vary depending on the amount of energy consumed in the process.
If the process is complex, such as issuing an NFT token, for example, this will require a lot of fees. But transferring Ethereum currency, for example, from one wallet on the network to another wallet will not require big fees.

Below are some examples of things that require fees on the Ethereum network:

  • Transferring Ethereum from one wallet to another.
  • Selling Ethereum on a decentralized network for another cryptocurrency swapping. Or sell another currency for Ethereum or to a third currency.
  • Issuing smart contracts on the network.
  • Issuing new NFT tokens on the network.
  • Transferring currencies from the Ethereum network to another network, whether on the second layer or another blockchain. This is known as blockchain bridges.
  • Issuing or sending a message via the blockchain.

All of these different operations require different network fees. The more effort the computers put in, the higher the fees.
For example, sending money via bridges is one of the most fee-intensive operations.

Can fees be reduced on the Ethereum network?

Yes, fees can be reduced on the Ethereum network. In general, if you avoid using bridges, the fees will decrease slightly.
You can also sacrifice the speed of completing your transaction in exchange for paying slightly lower fees, but in peak periods this will not make a big difference.

The most popular way to reduce fees on the Ethereum network is by using Layer 2 networks. These are simply secondary blockchains built on top of the Ethereum network whose purpose is to reduce gas fees.

These networks include Arbitrum, Polygon, and Optimism. Through these networks, you can perform transactions with much lower fees than Ethereum.
For example, if you want to buy the famous USDT currency, which is the crypto version of the fiat dollar, instead of doing this via the Ethereum network and paying large fees, you can do this on an alternative network on the second layer. This will save quite a lot in fees.

Other solutions to reduce gas fees

Other popular blockchain networks are considered an alternative to Ethereum, but these networks do not have the same projects as those on Ethereum. But they have different ecosystems.
The most famous of these networks are the Binance network, the Tron network, and the Solana network.

These alternative networks are characterized by speed and low costs, unlike Ethereum. But this does not mean at all that it is better.
USDT and other stablecoins can be purchased on it for much lower fees than on Ethereum.

But remember that sometimes some currencies are available on more than one different network. If you want to buy a currency available on the Ethereum network and Solana as well, always make sure that liquidity is good on the Solana network.
Most of the time liquidity is always better on the Ethereum network since it is the most popular and this applies even to second-layer networks like Polygon. Therefore, what you will save in gas fees, you may pay as price slippage due to the lack of sufficient liquidity.

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