Ethereum Network Fees: Explained

Elizabeth Wright
| Editor:
March 8, 2023
5 min read

What is an Ethereum network fee

ETH is the money unit on the Ethereum blockchain. When you interact with a contract, send ETH or tokens, or perform any actions on the blockchain, charges are applied for all the operations. All fees are counted in gas and later are settled by ETH.

The fees are paid despite the result of the activity. Even if the operation is rejected, the miners need to confirm and execute calculations. So, you have to compensate for their work, the same happens in the case of a completed transaction.

Ethereum blockchain options

The term ‘gas’ is applied to estimate the final sum of fees that must be paid online to complete an operation.

Gas is an internal monetary unit of the system used to conduct a transaction or smart contract. It is necessary to pay to miners, as well as to ensure the correctness of the transfer. The payment amount directly depends on the operation complexity. As a rule, this applies to smart contracts. They are more expensive than standard payments between participants.

Ethereum blockchain Features

The user can do the following:

  • Send ETH and tokens to the other user.
  • Start a smart contract and run it on the platform.
  • Implement a smart contract.

The users of the crypto-coin network are aware of the fees applied for conducting a transaction. It is transferred to miners for their performance. The task of the network participants is to set the appropriate amount of payment and initiate the operation. The rate of payment directly depends on the size of the commission. The higher gas amount enables a faster period of transaction completion.

What is GAS

“GAS” is the fuel for a transaction on Ethereum platform. It’s similar to kilowatts for measuring electricity. To send ETH between two wallets, minimum 21000 gas is required. To launch a smart contract a higher amount of gas may be required, the final sum may vary in each separate case. It happens as the contract (program) can perform a different number of operations during the work (more, than 1 operation).

While the gas value is linked to the operation, the amount paid by the user per unit of gas – the price of gas – is dynamic and is dictated by market conditions. The price of gas is a value that indicates how much air the user is willing to pay for gas.

ETH Gas Station is an excellent resource for understanding current gas market conditions. The section “Recommended User Gas Prices” shows the range of gas prices and the expected transaction time. The Atomic wallet can assist you in this matter as it calculates the required amount of gas automatically.

When studying Ethereum Gas it is important to understand the price of a unit of “fuel”. As Bitcoin consists of one hundred million Satoshi, so the ETH consists of many smaller units. So GWEI – this is one billionth of ETH.

If expressed numerically, then 1ETH = 1,000,000,000 Gwei. Therefore, 4 Gwei = 0,000000004 ETH

GWEI is actually a unit of calculation for settling the miners commission. To find out how much Gwei need to be paid for a transaction, you have to get acquainted with such concepts as gas limit and gas price. For every operation, the sender independently sets these values ​​and they will influence the speed of the transfer, and its performance in general.

What is the limit of GAS

Gas quota or limit is a factor that is used to calculate the final transaction value. It is multiplied by the Gas Price, and the result in the ETH will be the total transfer fee.

To initiate any operation in ETH, the sender has to show the gas limit before sending it to the platform. The gas limit is the highest value of the gas that the sender wishes to pay for the operation.

When forming a gas limit, the user should note: The gas amount depends upon the type of operation. Miners stop running if gas is over If some gas remains, it goes back to the creator of the operation.

Ethereum transaction example

Let’s review a simple ETH transaction: You want to transfer 0.006 ETH to a friend and you actually only have exactly 0.006 ETHs in your wallet.

The system will not allow you to transfer exactly 0.006 ETH since you will have non-zero parameters GAS LIMIT and GAS Price. Suppose you left them by default:
GAS LIMIT = 21000
Then the system will calculate that you can transfer the following sum:
0.006 – 21000 * 0.000000021 = 0.005559 ETH.

The miners are not keen on the deals with LOW gas value, because there is not enough gas to complete the calculation. If the transfer has LOW fees, but plenty of gas to protect it, the miners also do not want to carry out the operation, because the transfer with a low commission is not financially attractive to them.

If the transaction has a high gas limit, this means miners will not take it in order not to return a lot. If the operation has a high pay, then the miners are getting a good reward and take it immediately.

Ethereum remains a convenient platform for using the power of the blockchain to decentralize the global economy. Potentially decentralized applications can revolutionize many areas of the economy in finance, real estate, science, insurance, healthcare, and public administration. While we are witnessing the very beginning of this path, on which, undoubtedly, there will be many more obstacles, but Ethereum looks very promising.

You can easily manage all your Ethereum transactions using Atomic wallet. It is a decentralized application enabling cross-chain exchange without any middlemen. Apart from ETH, Atomic wallet supports all Ethereum tokens and over 300 cryptocurrencies. Try it now!

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